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UNITED STATES
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the
Securities Exchange Act of 1934 (Amendment
(Amendment No. )
Filed by the Registrant x Filed by a Party other than the Registrant ¨
Check the appropriate box:
¨ | Preliminary Proxy Statement | |
¨ | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
x | Definitive Proxy Statement | |
¨ | Definitive Additional Materials | |
¨ | Soliciting Material under §240.14a-12 | |
HEXCEL CORPORATION
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
x | No fee required. | |||
¨ | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | |||
| (1) | Title of each class of securities to which transaction applies: | |||
| (2) | Aggregate number of securities to which transaction applies: | |||
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Table of ContentsHexcel Corporation
Hexcel Corporation
Two Stamford Plaza
281 Tresser Boulevard
Stamford, Connecticut 06901-3238
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on May 3, 2012
The Annual Meeting of Stockholders of Hexcel Corporation will be held in the Community Room, Two Stamford Plaza, 281 Tresser Boulevard, Stamford, Connecticut, on May 3, 20127, 2015 at 10:30 a.m. for the following matters:
| 1. | To elect eleven individuals (Nick L. Stanage, Joel S. Beckman, Lynn Brubaker, Jeffrey C. Campbell, Cynthia M. Egnotovich, W. Kim Foster, Thomas A. Gendron, Jeffrey A. Graves, Guy C. Hachey, David C. Hill and David L. Pugh) to serve as directors until the next annual meeting of stockholders and until their successors are duly elected and qualified; |
| 2. | To conduct an advisory vote to approve the company’s 2014 executive compensation; |
| 3. | To ratify the appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm for 2015; and |
| 4. | To transact such other business as may properly come before the meeting or any adjournments or postponements thereof. |
Stockholders of record at the close of business on March 8, 201212, 2015 will be entitled to vote at the meeting and any adjournments or postponements. A list of these stockholders will be available for inspection at the executive offices of Hexcel and will also be available for inspection at the annual meeting.
| By order of the board of directors | ||
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Ira J. Krakower Senior Vice President, General Counsel and Secretary |
Dated: March 16, 201219, 2015
YOUR VOTE IS IMPORTANT. PLEASE SIGN, DATE AND COMPLETE THE
ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED
PRE-ADDRESSED, POSTAGE-PAID, RETURN ENVELOPE.
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Matters of Business, Votes Needed and Recommendations of the Board of Directors | 2 | |||
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT | ||||
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Potential Impact on Compensation from Executive Misconduct | ||||
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Compensation Committee Interlocks and Insider Participation | ||||
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Option Exercises and Stock Vested in | ||||
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Benefits Payable Upon Termination of Employment on December | 54 | |||
PROPOSAL 2—APPROVAL OF THE | 55 | |||
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PROPOSAL 3—RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | ||||
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Table of ContentsHexcel Corporation
Hexcel Corporation
Two Stamford Plaza
281 Tresser Boulevard
Stamford, Connecticut 06901-3238
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
To be held on May 3, 20127, 2015
This proxy statement is furnished to the holders of Hexcel Corporation ("Hexcel"(“Hexcel” or the "company"“company”) common stock, in connection with the solicitation of proxies by Hexcel on behalf of the Board of Directors of the company (the "board“board of directors"directors” or the "board"“board”) for use at the Annual Meeting of Stockholders, or any adjournments or postponements of the meeting (the "Annual Meeting"“Annual Meeting”) to be held on May 3, 2012.7, 2015. This proxy statement and the accompanying proxy/voting instruction card are first being maileddistributed or made available to stockholders on or about March 16, 2012.19, 2015.
You will be eligible to vote your shares of common stock at the Annual Meeting if you were a stockholder of record at the close of business on March 8, 2012.12, 2015. As of that date, 101,742,17496,342,334 shares of common stock were issued and outstanding and such shares were held by 987778 holders of record. The holders of 50,871,08848,171,168 shares will constitute a quorum at the meeting.
Each share of common stock that you hold will entitle you to cast one vote with respect to each matter that will be voted on at the Annual Meeting. All shares that are represented by effective proxies that we receive in time to be voted shall be voted at the Annual Meeting. If you direct how your votes shall be cast, shares will be voted in accordance with your directions. If a you return a signed proxy and do not otherwise instruct how to vote on the proposals, then the shares represented by your proxy will be voted for each of the director candidates nominated by the board, for approval of the company's 2011company’s 2014 executive compensation, and in favor of the ratification of the appointment of PricewaterhouseCoopers LLP as independent registered public accounting firm for 2012,2015, and in the discretion of the proxy holders on any other matters that may come before the Annual Meeting. If you return a signed proxy with abstentions, your shares will be included in determining whether or not a quorum is present.
Pursuant to the rules of the New York Stock Exchange ("NYSE"(“NYSE”), if you hold your shares in street name through a broker, your broker is not permitted to vote your shares on Proposal 1 (election of directors), or Proposal 2 (advisory vote on the company's 2011company’s 2014 executive compensation) unless you give your broker specific instructions as to how to vote. If you are a street name holder and do not provide instructions to your broker on Proposals 1 and 2, your shares that are voted on any other matter will count toward a quorum but your broker cannot vote your shares on Proposals 1 and 2 (a "broker non-vote"“broker non-vote”). Accordingly, shares subject to a broker non-vote will be disregarded and will have no effect on the outcome of the vote on Proposals 1 and 2. However, if you obtain, sign and return a
voting instruction card to your broker, your shares will be voted as you instruct or, if you do not provide
instructions on the returned card, your shares will not be voted on Proposals 1 and 2, but may be voted, in the proxy holder'sholder’s discretion, on Proposal 3 and any other matters on which the proxy holder may properly vote.
We will pay all costs of preparing, assembling, printing and distributing the proxy materials. We have retained Morrow & Co., LLC, 470 West Avenue, Stamford, Connecticut, 06902, to assist in soliciting proxies for a fee of approximately $8,000,$9,000, plus reasonable out-of-pocket expenses. Our employees may solicit proxies on behalf of our board through the mail, in person, and by telecommunications. We will request that brokers and nominees who hold shares of common stock in their names furnish proxy solicitation materials to beneficial owners of the shares, and we will reimburse the brokers and nominees for reasonable expenses they incur to do this.
If you give a proxy, you may revoke it at any time prior to the Annual Meeting by:
mailing a revocation to Mr. Ira J. Krakower, the Secretary of the company, at the above address with a later date than any proxy you previously provided so long as it is received prior to the Annual Meeting;
submitting another properly completed proxy dated later than any proxy you previously provided so long as it is received by Mr. Krakower prior to the Annual Meeting;
by filing a written revocation at the Annual Meeting with Mr. Krakower, the Secretary of the company;Krakower; or
by casting a ballot at the meeting.
If you are an employee stockholder who holds shares through one of our benefit plans, you may revoke voting instructions given to the trustee for the applicable plan by following the instructions under "How“How to Vote Your Shares—Employee Stockholders"Stockholders” in this proxy statement.
Matters of Business, Votes Needed and Recommendations of the Board of Directors
Proposal 1—Election of Directors
Each outstanding share of our stock is entitled to one vote for as many separate nominees as there are directors to be elected. There are teneleven directors to be elected. The board has nominated David E. Berges,Nick L. Stanage, Joel S. Beckman, Lynn Brubaker, Jeffrey C. Campbell, Sandra L. Derickson,Cynthia M. Egnotovich, W. Kim Foster, Thomas A. Gendron, Jeffrey A. Graves, Guy Hachey, David C. Hill and David L. Pugh for election to the board. Each of these teneleven nominees is currently a director of the company. Once a quorum is present, a majority of the votes cast in person or represented by proxy at the Annual Meeting and entitled to vote is required to elect each of the nominees for director. This means that each nominee must receive more votes "for"“for” than "against"“against” to be elected. "Broker non-votes"Broker non-votes and abstentions will be disregarded and will have no effect on the outcome of the vote.The board of directors recommends that you vote FOR the election of each of the board'sboard’s nominees for director.
Proposal 2—Advisory Vote to Approve Executive Compensation
Approval of the company's 2011company’s 2014 executive compensation requires the affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote on the matter at the Annual Meeting once a quorum is present. In determining whether the proposal to approve 20112014 executive compensation receives the required number of affirmative votes, abstentions will be counted and will have the same effect as a vote against the proposal. "Broker non-votes"Broker non-votes will be disregarded and will have no effect on the outcome of the vote. The vote is advisory and non-binding,non-binding; however, the compensation committee will reviewconsider the voting results and take them into consideration as one factor
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among other factors when making future decisions regarding executive compensation, in conjunction with other factors such as feedback from stockholder outreach programs.compensation.The board of directors recommends that you vote FOR the resolution approving the company's 2011company’s 2014 executive compensation.
Proposal 3—Ratification of Independent Registered Public Accounting Firm
Ratification of the appointment of PricewaterhouseCoopers LLP to audit the company'scompany’s financial statements for 20122015 requires the affirmative vote of a majority of the shares present in person or represented by proxy and entitled to vote on the matter at the Annual Meeting once a quorum is present. Abstentions will be counted and will have the same effect as a vote against the proposal. The audit committee is responsible for appointing the company'scompany’s independent registered public accounting firm. The audit committee is not bound by the outcome of this vote but, if the appointment of PricewaterhouseCoopers LLP is not ratified by stockholders, the audit committee will reconsider the appointment.The board of directors recommends that you vote FOR the ratification of the selection of PricewaterhouseCoopers LLP as the company'scompany’s independent registered public accounting firm for 2012.2015.
Voting shares you hold through a nominee
If you hold shares through someone else, such as a stockbroker, bank or nominee, you will receive material from that firm asking you for instructions on how you want them to vote your shares. You can complete that firm'sfirm’s voting instruction form and return it as requested by the firm. If the firm offers Internet or telephone voting, the voting form will contain instructions on how to vote using those methods.
If You Planyou plan to Attendattend the Meetingmeeting
Please note that attendance will be limited to stockholders as of the record date. Admission will be on a first-come, first-served basis. If you attend the Annual Meeting, you will need to present valid picture identification, such as a driver'sdriver’s license or passport. If you hold your shares through someone else, such as a stockbroker, bank or other nominee, you will need to show a brokerage statement or account statement reflecting your stock ownership as of the record date. Cameras, recording devices and other electronic devices will not be permitted at the Annual Meeting. You may contact Morrow & Co., LLC at (800) 607-0088 to obtain directions to the site of the Annual Meeting. The doors to the meeting will open at 10:00 a.m. local time and the meeting will begin at 10:30 a.m. local time.
Voting in person
If you are a registered stockholder, you may vote your shares in person by ballot at the Annual Meeting.
If you hold your shares in a stock brokerage account or through a bank or other nominee, you will not be able to vote in person at the Annual Meeting unless you have previously requested and obtained a "legal proxy"“legal proxy” from your broker, bank or other nominee and present it at the Annual Meeting along with a properly completed ballot.
Employee Stockholdersstockholders
If you hold shares through our employee stock purchase plan or our tax-deferred 401(k) savings plan, you will receive a separate voting instruction form to instruct the custodian or trustee for the applicable plan as to how to vote your shares. With respect to the 401(k) plan, all shares of common
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stock for which the trustee has not received timely instructions shall be voted by the trustee in the same proportion as the shares of common stock for which the trustee received timely instructions, except if that would be inconsistent with the provisions of Title I of ERISA. With respect to our employee stock purchase plan, we consider all shares of common stock for which the custodian has not received timely instructions not present for quorum purposes and those shares will not be voted by the custodian.
At the Annual Meeting, American Stock Transfer & Trust Company will count the votes. Its officers or employees will serve as inspectors of election.
PROPOSAL 1—ELECTION OF DIRECTORS
At the 20122015 annual meeting, teneleven directors will be elected to hold office until the 20132016 annual meeting and until their successors are duly elected and qualified. All nominees identified in this proxy statement for election to the board are currently serving as directors of the company.
Shares represented by an executed and returned proxy card will be voted for the election of each of the teneleven nominees recommended by the board, unless the proxy is marked against any nominee. If any nominee for any reason is unable to serve, the shares of common stock represented by the proxy card may, at the board'sboard’s discretion, be voted for an alternate person that the board nominates. We are not aware of any nominee who will be unable to or will not serve as a director. Each of the nominees has consented to being named in this proxy statement and to serve if elected.
Majority Voting Standard for Election of Directors.
Directors
Our Amended and Restated Bylaws provide for a majority voting standard for the election of directors in uncontested elections. Under this standard, a director nominee will be elected only if the number of votes cast "for"“for” that nominee exceeds the number of votes cast "against"“against” that nominee. Broker non-votes and abstentions will be disregarded and will have no effect on the outcome of the vote. Each director nominee must submit an irrevocable resignation in advance of the stockholder vote regarding the election of directors. This addresses the situation in which there is a "holdover"“holdover” director who has not received the required number of votes for re-election, but remains on the boardwho, in accordance with Delaware law, remains on the board until his or her successor is elected and qualified. The resignation would beis contingent upon both the nominee not receiving the required vote for re-election and the board'sboard’s acceptance of the resignation which the board, in its discretion, may reject if it deems such rejection to be in the best interest of the company.
Prior to the board'sboard’s determination to accept or reject the resignation, the nominating and corporate governance committee, composed entirely of independent directors, will make a recommendation to the board with respect to the tendered resignation. In its review, the committee will consider those factors deemed relevant to the determination, and whether the director'sdirector’s resignation from the board would be in the best interest of the company and our stockholders.
The board must take action on the committee'scommittee’s recommendation within 90 days following the meeting at which the election of directors occurred. An incumbent director whose resignation is the subject of the board'sboard’s determination is not permitted to participate in the deliberations or recommendation of the committee or the board.board regarding the acceptance of the resignation.
In the case of contested elections (a situation in which the number of nominees exceeds the number of directors to be elected) the plurality voting standard will apply.
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Information Regarding the Directors
All of our current directors have been nominated for re-election to the board. Information aboutIn concluding that our current directors is provided below.should continue to serve on our board, the nominating and corporate governance committee considered the following attributes of our directors: extensive familiarity with large-scale operations; industry expertise and professional relationships; the ability to utilize extensive past experience in management, finance, technology and operations, and other areas, to address issues we face on a recurring basis; collegiality and the ability to work together as a group; outstanding integrity and business judgment; and the ability to ask probing
questions during board discussions and to carefully scrutinize significant business, financing and other proposals suggested by management. In addition to these factors, the committee also considered the attributes below in concluding that our current directors should continue to serve on our board:
Name | Age on March 15, 2012 | Director Since | Position(s) With Hexcel | ||||
|---|---|---|---|---|---|---|---|
David E. Berges | 62 | 2001 | Chairman of the Board; Chief Executive Officer; Director | ||||
Joel S. Beckman | 56 | 2003 | Director | ||||
Lynn Brubaker | 54 | 2005 | Director | ||||
Jeffrey C. Campbell | 51 | 2003 | Director | ||||
Sandra L. Derickson | 59 | 2002 | Director | ||||
W. Kim Foster | 63 | 2007 | Director | ||||
Thomas A. Gendron | 51 | 2010 | Director | ||||
Jeffrey A. Graves | 50 | 2007 | Director | ||||
David C. Hill | 65 | 2008 | Director | ||||
David L. Pugh | 63 | 2006 | Director | ||||
DAVID E. BERGES
NICK L. STANAGE,56, director since 2013
Position, Principal Occupation, Business Experience and Directorships:
Mr. Stanage became a director and President and Chief Executive Officer on August 1, 2013 and became Chairman of the Board on January 1, 2014. He has served as our Chairman ofPresident since November 2009, and also as Chief Operating Officer from May 2012 until assuming the Board of Directors and Chief Executive Officer since July 2001, and was our President from February 2002 to February 2007.position. Prior to joining Hexcel, Mr. BergesStanage was President of the AutomotiveHeavy Vehicle Products group (including both Commercial Vehicle Products and Off Highway Products) at Dana Holding Corporation from December 2005 to October 2009, and served as Vice President and General Manager of the Commercial Vehicle group at Dana from August 2005 to December 2005. From 1986 to 2005, Mr. Stanage held positions of increasing responsibility in engineering, operations and marketing with Honeywell Inc. (formerly AlliedSignal Inc.) including: Vice President Integrated Supply Chain and Technology for the Consumer Products Group of Honeywell International Inc. from 19972003 to July 2001January 2005, and Vice President and General Manager of the Aerospace Group’s Engine Systems and Accessories at AlliedSignal AerospaceDivision from 1994January 2005 to 1997. PreviouslyAugust 2005. Mr. Berges wasStanage also serves on the board of directors of TriMas Corporation, as well as on the audit, compensation, and corporate governance and nominating committees of TriMas.
Key Attributes, Experience and Skills:
Mr. Stanage has developed an in-depth understanding of the company’s business operations, growth opportunities and challenges and its customer and product base during his five-year tenure as President, and Chief Operating Officer of Barnes Aerospace, a division of Barnes Group Inc. Mr. Berges spent the first 15 years ofand his career in a variety of managerialcurrent role as Chairman, Chief Executive Officer and technical positions with the General Electric Company. Mr. Berges was a director ofPresident. His over 20 years’ management and operations experience at Dana Corporation from 2004 to January 2008.and Honeywell provide him with critical expertise in the management, financial and operational requirements of a global manufacturing company.
JOEL S. BECKMAN has been a, 59, director of Hexcel since March 2003
Position, Principal Occupation, Business Experience and is chair of our finance committee and a member of our compensation committee. Directorships:
Mr. Beckman is a Managing Partner of Greenbriar Equity Group LLC, a private equity fund focused exclusively on making investments in transportation and transportation-related companies. Prior to founding Greenbriar in 2000, Mr. Beckman was a Managing Director and Partner of Goldman, Sachs & Co., which he joined in 1981. Mr. Beckman is on the board of a number of private companies, and is active in various civic organizations.
LYNN BRUBAKER has beenKey Attributes, Experience and Skills:
Mr. Beckman brings nearly 30 years’ experience as a director of Hexcel since December 2005,banker and is a memberan investor in transportation (including aerospace) companies with both Greenbriar Equity Group and Goldman Sachs to his role on the board. In addition to Mr. Beckman’s valuable contributions related to the transportation sector, his experience in private equity led to his appointment as chair of our auditfinance committee and nominatinghas made him a key contributor to refinancing and corporate governance committee. Shecapital structure discussions since joining the board.
LYNN BRUBAKER, 57, director since 2005
Position, Principal Occupation, Business Experience and Directorships:
Ms. Brubaker retired after spending thirty years in the aerospace industry in a variety of executive, operations, sales and markingmarketing and customer support roles. From 1999 until June 2005 she was Vice President/General Manager—Commercial Aerospace for Honeywell International Inc., with her primary focus in that role being on business strategies and customer operations for Honeywell'sHoneywell’s global commercial markets. From 1997 to 1999, Ms. Brubaker was Vice President Americas for Honeywell, and from 1995 to 1997, prior to AlliedSignal'sAlliedSignal’s merger with Honeywell, she was Vice President, Marketing, Sales and Support Operations, for AlliedSignal. Prior to joining AlliedSignal, Ms. Brubaker held a variety of management positions with McDonnell Douglas, Republic (predecessor to Northwest Airlines), and Comair. Ms. Brubaker has been a director of FARO Technologies, Inc. since July 2009, and serves on its audit, compensation and nominating and corporate governance committees. Ms. Brubaker also currently serves on the board of a variety of private companies and other business organizationscompany and from March to December 2011, was a director of Force Protection Inc.
Key Attributes, Experience and Skills:
Ms. Brubaker’s extensive experience in the commercial aerospace, defense and space industries, in a wide variety of roles, makes her a valuable contributor to the board of Hexcel. Ms. Brubaker’s aerospace experience runs the gamut from operator to original equipment manufacturer to aftermarket. Her ongoing aerospace industry involvement and relationships provide the board with additional customer feedback independent of management. In addition, Ms. Brubaker has used her expertise in sales and marketing management to assess and advise our marketing and sales managers. Ms. Brubaker’s extensive contacts within key markets for Hexcel, as well as her experience on the boards of other companies, make her well-suited to lead our nominating and corporate governance committee.
JEFFREY C. CAMPBELL has been a, 54, director of Hexcel since November 2003
Position, Principal Occupation, Business Experience and is chair of our audit committee. Directorships:
Mr. Campbell has served as Executive Vice President and Chief Financial Officer of the American Express Company, a global services company, since August 2013. From January 2004 to June 2013, he served as Executive Vice President and Chief Financial Officer of McKesson Corporation, a leading healthcare services, information technology and distribution company, since January 2004.company. Mr. Campbell was Senior Vice President and Chief Financial Officer of
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AMR Corp, the parent company of American Airlines, from June 2002 to December 2003, served as a Vice President of American Airlines from 1998 to June 2002 and served in various management positions of American Airlines from 1990 to 1998. Mr. Campbell worked as a Certified Public Accountant with Deloitte, Haskins & Sells from 1986 to 1988.
Key Attributes, Experience and Skills:
As a result of Mr. Campbell’s extensive experience in finance and accounting, including his current role as CFO of American Express, a $34 billion global services company, and his prior role as CFO of McKesson, a $100 billion healthcare services company, as well as over ten years in executive and management positions in the aerospace industry (American Airlines), he brings significant financial acumen to the board, providing valuable expertise and guidance in areas such as compliance, risk management, financing, investor relations and systems solutions. Mr. Campbell’s breadth and depth of experience in financial roles, including that of CFO of three multi-national, publicly traded companies, provides us with the financial expertise that is critical in the role of chair of the audit committee.
SANDRA L. DERICKSON
CYNTHIA M. EGNOTOVICH, 57, director since 2015
Position, Principal Occupation, Business Experience and Directorships:
Ms. Egnotovich served as President, Aerospace Systems Customer Service of United Technologies Corporation (“UTC”) from July 2012 to November 2013. Previously, Ms. Egnotovich served as Segment President, Nacelles and Interior Systems for Goodrich Corporation (which was acquired by UTC) from 2007 to 2012. Ms. Egnotovich joined Goodrich in 1986 and held leadership roles of increasing significance, including serving as Segment President of Engine Systems, Segment President Electronic Systems and Segment President Engine & Safety Systems. Ms. Egnotovich has been a director of HexcelThe Manitowoc Company since February 2002. Ms. Derickson is chair of our nominating and corporate governance committee, a member of our compensation committee and Presiding Independent Director. Ms. Derickson retired from HSBC in February 2007. She held several management positions at HSBC from September 2000 to February 2007 including President and Chief Executive Officer, HSBC Bank USA; Vice Chairman, HSBC Finance; and Group Executive, HSBC Finance. During her tenure, she was responsible for private label credit cards, insurance services, taxpayer services, auto financing and some of the Group's mortgage businesses. From 1976 to 1999, Ms. Derickson held various management positions with General Electric Capital Corporation, the last of which was President of GE Capital Auto Financial Services. Ms. Derickson was also an officer of the General Electric Company.
W. KIM FOSTER has been a director of Hexcel since May 2007,2008 and is a member of its audit committee and serves as the chair of its compensation committee.
Key Attributes, Experience and Skills:
Ms. Egnotovich brings to the Hexcel board almost thirty years’ experience in the aerospace industry, much of which was in senior leadership roles. Ms. Egnotovich has significant experience overseeing and assessing the performance of companies, as well as their accountants, which makes her well-suited to serve on our audit committee. In addition, Ms. Egnotovich is able to offer the board a different perspective based on her experience as a director of a publicly traded manufacturing company outside of the aerospace industry. Mr. Stanage suggested to our outside search firm that Ms. Egnotovich be included among other possible candidates for director to replace Sandra Derickson, who retired at the end of 2014.
W. KIM FOSTER, 66, director since 2007, Lead Director
Position, Principal Occupation, Business Experience and Directorships:
From 2001 until October 2012, Mr. Foster has served as Executive Vice President and Chief Financial Officer of FMC Corporation, a chemical manufacturer serving various agricultural, industrial and consumer markets, since 2001.markets. Prior to serving in his currentthis role, Mr. Foster held numerous other executive and management positions with FMC, including Vice President and General Manager—Agricultural Products Group from 1998 to– 2001; Director, International, Agricultural Products Group from 1996-1998; General Manager, Airport Products and Systems Division, 1991-1996; and Program Director, Naval Gun Systems, FMC Defense Group, from 1989 to 1991.
THOMAS A. GENDRON Mr. Foster has been a director of HexcelTeleflex, Inc. since December 2010,May 2013 and isserves as the chair of its audit committee.
Key Attributes, Experience and Skills:
Mr. Foster has over 30 years’ management, operations and finance experience with FMC Corporation, including over eleven years as CFO, as well as experience as a director of another public company. He provides expertise and advice in the finance and investor relations areas, and his background in chemical operations has proven valuable in connection with discussions of capital spending and global sourcing. Mr. Foster’s many years of managing a large and geographically dispersed finance organization, his experience as the CFO of a publicly-traded company and his tenure as a member of our compensation committee. Since 2007, the board of Hexcel led his fellow directors to appoint him as Lead Director starting in January 2014.
THOMAS A. GENDRON, 54, director since 2010
Position, Principal Occupation, Business Experience and Directorships:
Mr. Gendron has been Chairman, Chief Executive Officer and President of Woodward, Inc., a designer, manufacturer and service provider of energy control and optimization solutions used in global infrastructure equipment, serving the aerospace, power generation and distribution and transportation markets. markets, since 2007.
Mr. Gendron was President and Chief Executive Officer of Woodward from 2005 to 2007 and President and Chief Operating Officer from 2002 to 2005. Prior to becoming President of Woodward, Mr. Gendron served in a variety of management positions at Woodward.
Key Attributes, Experience and Skills:
Mr. Gendron’s experience as president and CEO of Woodward, a NASDAQ-listed company, includes extensive operations and marketing experience in the aerospace and wind power industries. Woodward’s global aircraft and wind turbine controls business enables Mr. Gendron to provide the board with insight as to the aerospace and wind power industry, and offer guidance on the development of marketing strategies. In addition, Mr. Gendron’s significant manufacturing management experience makes him well-suited to advise our operations team.
JEFFREY A. GRAVES has been a, 53, director of Hexcel since July 2007
Position, Principal Occupation, Business Experience and is a member of our finance committee and nominating and corporate governance committee.Directorships:
Since May 2012, Dr. Graves has served as Chief Executive Officer and President of MTS Systems Corporation, a leading global supplier of test systems and industrial position sensors. From 2005 until May 2012, Dr. Graves served as President and Chief Executive Officer of C&D Technologies, Inc., a producer of electrical power storage systems, since 2005.systems. From 2001 to 2005 he was employed by Kemet Corporation as Chief Executive Officer (2003 to 2005); President and Chief Operating Officer (2002-2003); and Vice President of Technology and Engineering (2001-2002). From 1994 to 2001 Dr. Graves was employed by the General Electric Company, holding a variety of management positions in GE'sGE’s Power Systems Divisiondivision from 1996 to 2001, and in the Corporate Research and Development Center from 1994 to 1996. Prior to General Electric, Dr. Graves was employed by Rockwell International and Howmet Corporation, now a part of Alcoa Corporation. Dr. Graves is also a member of the board of directors of MTS Systems Corporation and Teleflex, Inc. Dr. Graves serves on Teleflex’s compensation committee. Dr. Graves was a member of the board of directors of C&D Technologies, Inc. from 2005 through 2012.
Key Attributes, Experience and Teleflex, Inc., and served on the board of Technitrol, Inc. from January 2006 through May 2007. Skills:
Dr. Graves has servedten years’ experience as the chairmana CEO of Teleflex's compensation committee since 2011.
DAVID C. HILL has beenthree NYSE-listed companies and substantial experience as a director of Hexcelother US public companies. Dr. Graves has significant global operations and R&D experience, including with GE, holds a PhD in Materials Science and has extensive prior involvement in materials development and application processes for airframe, propulsion systems and energy fields. In addition to the obvious value as an experienced CEO of three public companies, Dr. Graves was recruited to the board to help provide additional technical expertise. He has extensive experience doing business in China and India, enabling him to provide valuable contributions to discussions related to our Asia Pacific strategy, particularly with respect to industrial markets. Dr. Graves and Dr. Hill regularly review our R&D programs and organization and report back to the board their findings and recommendations. In addition, Dr. Graves has advised on information technology projects based on his past experience with the implementation of enterprise resource planning systems.
GUY C. HACHEY,59, director since 2014
Position, Principal Occupation, Business Experience and Directorships:
From May 2008 to July 2014, Mr. Hachey served as President and Chief Operating Officer of Bombardier Aerospace, Inc. Prior to joining Bombardier in 2008, Mr. Hachey held numerous roles with Delphi Corporation, including the combined positions of Vice President, Delphi Corporation and President, Delphi
Europe, Middle East and Africa, as well as Executive Champion for Delphi’s global manufacturing operations. Mr. Hachey began his career in 1978 with General Motors Corporation where he held manufacturing and engineering leadership positions in Canada and the U.S.
Key Attributes, Experience and Skills:
Mr. Hachey’s six years’ experience as the President and Chief Operating Officer of a major aircraft manufacturer enables him to provide critical insight into Hexcel’s aerospace product offerings across the globe. In addition, Mr. Hachey has significant experience overseeing global automotive manufacturing businesses and is able to offer a membervaluable perspective to discussions regarding our manufacturing operations, global manufacturing footprint, and industrial markets. Mr. Stanage suggested to our outside search firm that Mr. Hachey be included among other possible candidates for director when Hexcel decided to increase the size of our audit committeeits board in 2014.
DAVID C. HILL, 68, director since 2008
Position, Principal Occupation, Business Experience and finance committee. Directorships:
Dr. Hill served as President and Chief Executive Officer of Sun Chemical Corporation, a producer of printing inks and pigments, from 2001January 2006 until his retirement in December 2007. During this time he was also a Supervisory Board member of Sun Chemical Group B.V. From 2001 to 2005, Dr. Hill was Sun Chemical’s Chief Technology and Operating Officer. Prior to joining Sun Chemical Corporation in 2001, Dr. Hill spent four years at JM Huber Corporation as President of Engineered Materials. From 1980 to 1997, Dr. Hill served at
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AlliedSignal Inc., where he was President, Fibers from 1991 to 1994, Chief Technology Officer, Engineered Materials from 1994 to 1995 and President, Specialty Chemicals through 1997. Dr. Hill began his career at Union Carbide Corporation in 1970, and has also been Director of Exploratory and New Ventures Research at Occidental Petroleum Corporation. He holds a Ph.D. in Materials Science and Engineering as well as an M.S. in Engineering and a B.S. in Materials Science and Engineering from Massachusetts Institute of Technology. Dr. Hill was a member of the board of directors of Symyx Technologies, Inc. from 2007 to 2010, and served as a member of its compensation committee and as the chair of its governance committees.committee.
Key Attributes, Experience and Skills:
Dr. Hill brings over 40 years’ management, operations and technology experience in large-scale chemicals and engineered materials organizations to the Hexcel board, including two years as CEO of Sun Chemical Corporation and membership in the National Association of Corporate Directors. In addition to his advanced technical degrees (Ph.D. and M.S.), Dr. Hill has extensive knowledge regarding the development, manufacture and use of advanced fibers. Dr. Hill was selected to provide the board and management additional technical expertise, particularly related to our fibers and chemical-based products. His extensive experience with the application of continuous improvement techniques to maximize capital efficiency has made him a key contributor to the board, particularly in connection with capital expansion, utilization and resources. Dr. Hill and Dr. Graves regularly review our R&D programs and organization and report back to the board their findings and recommendations.
DAVID L. PUGH has been a, 66, director of Hexcel since July 2006
Position, Principal Occupation, Business Experience and is chair of our compensation committee. Directorships:
Mr. Pugh served as the Chairman and Chief Executive Officer of Applied Industrial Technologies Inc., one of North America'sAmerica’s leading industrial product distributors, from October 2000 until October 2011. He was President and Chief Operating Officer of Applied from January 1999 to January 2000 and President and Chief
Executive Officer of Applied from January 2000 to October 2000. Prior to joining Applied, Mr. Pugh was senior vice president of Rockwell Automation and general manager of Rockwell'sRockwell’s Industrial Control Group. Prior to joining Rockwell, Mr. Pugh held various sales, marketing and operations positions at Square D. Co. and Westinghouse Electric Corp. Mr. Pugh is also a member of the board of directors of NN, Inc. and serves on its audit and compensation committees.
Key Attributes, Experience and Skills:
Mr. Pugh was CEO of an NYSE-listed company for eleven years until retirement in 2011. Throughout his career, he gained extensive operations and sales and marketing experience in large-scale global manufacturing organizations; and extensive experience as a director of public companies. Mr. Pugh’s expertise in factory control systems and equipment maintenance programs has provided valuable expertise to the board and to our operations management team. Mr. Pugh is chair of the compensation committee and brings important perspectives in the executive compensation area to both the compensation committee and the board, as a result of his varied experiences with other public boards.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR
ELECTION OF EACH OF THE NOMINEES FOR DIRECTOR
We currently have nineten independent directors out of teneleven directors. Our board affirmatively determined that each director nominee, other than Mr. Berges,Stanage, who is our Chairman, and Chief Executive Officer and President, meets the NYSE director independence requirements. In making these determinations our board considered whether a director has a "material relationship"“material relationship” with us as contemplated by the NYSE listing standards. One non-employee director has a relationship with us other than as a director of Hexcel. Ms. Brubaker is a director of a private aerospace company that is our customer. In determining that Ms. Brubaker did not have a material relationship with us, and thus was thus, independent, our board considered, among other things, the sales to this private aerospace company as a percentage of our total sales, as well as that Ms. Brubaker has no significant direct or indirect pecuniary interest in the business relationship between us and this private aerospace company. Under the NYSE listing standards, Mr. BergesStanage is not independent by virtue of his being employed by us.
Meetings and Standing Committees of the Board of Directors
General
During 20112014 there were fiveeight meetings of the board and 18one action by written consent, and 19 meetings and one action by written consent in the aggregate of the four standing committees of the board. The board did not take any action by written consent. Each of the incumbent directors who served on the board and its committees during 20112014 attended or participated in at least 75% of the aggregate number of board meetings and applicable committee meetings held during 2011.2014, except for Mr. Hachey, who became a director in October 2014. Mr. Hachey attended 100% of the meetings held after his nomination as a director. Ms. Egnotovich became a director on January 1, 2015 and therefore did not participate in any meetings in 2014. A director is expected to regularly attend and participate in meetings of the board and of committees on which the director serves, and to attend the annual meeting of stockholders. Each of the incumbent directors other than Mr. Hachey and Ms. Egnotovich attended the last annual meeting of stockholders.
The board has established the following standing committees: audit committee; compensation committee; finance committee; and nominating and corporate governance committee. The board may establish other special or standing committees from time to time. Members of committees serve at the discretion of the board. Each of our four standing committees operates under a charter adopted by the board. The charter for each committee except the finance committee requires that all members be independent as required by NYSE listing
standards. The charter of the finance committee prohibits the committee from taking any action that is required by NYSE rules to be taken by a committee
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composed entirely of independent directors, unless the finance committee is composed entirely of independent directors. Our board has also adopted a set of corporate governance guidelines. All committee charters and the corporate governance guidelines can be viewed on the investor relations section of our website,www.hexcel.com, under "Corporate“Corporate Governance."” You may obtain a copy of any of these documents, free of charge, by directing your request to Hexcel Corporation, Attention: Investor Relations Manager, Two Stamford Plaza, 281 Tresser Boulevard, Stamford, CT 06901, telephone (203) 352-6826.
The table below provides information regarding membership of each board committee and meeting held during fiscal year 2014:
Name | Audit | Compensation | Nominating and Corporate Governance | Finance | ||||
Joel S. Beckman | Ö | Chair | ||||||
Lynn Brubaker | Ö | Chair | ||||||
Jeffrey C. Campbell | Chair | |||||||
Sandra L. Derickson* | Ö | Ö | ||||||
W. Kim Foster | Ö | Ö | ||||||
Thomas A. Gendron | Ö | |||||||
Jeffrey A. Graves | Ö | Ö | ||||||
Guy Hachey | Ö | |||||||
David C. Hill | Ö | Ö | ||||||
David L. Pugh | Chair | |||||||
Number of Meetings | 8 | 6 | 3** | 2 |
| * | Ms. Derickson retired from our board at the end of 2014. |
| ** | In addition, the Nominating and Corporation Governance Committee acted once by written consent. |
Audit Committee
The audit committee assists with the board'sboard’s oversight of the integrity of our financial statements, our exposure to risk and mitigation of those risks, our compliance with legal and regulatory requirements, our independent registered public accounting firm'sfirm’s qualifications, independence and performance, and our internal audit function. During 2011, the audit committee held eight meetings. Additional information regarding the audit committee, including additional detail about the functions performed by the audit committee, is set forth in the Audit Committee Report included on page 5657 of this proxy statement. The current members of the audit committee are Mr. Campbell (chair), Ms. Brubaker, Mr. Foster and Mr. Hill.
Each member of our audit committee is independent under applicable law and NYSE listing standards. All members of our audit committee meet the financial literacy requirements of the NYSE and at least one member has accounting or related financial management expertise as required by the NYSE. In addition, our board has determined that Jeffrey C. Campbell who currently is Executive Vice President and Chief Financial Officer of McKesson Corporation, is an audit committee financial expert under SEC rules.
The audit committee has adopted procedures for the receipt, retention and handling of concerns regarding accounting, internal accounting controls and auditing matters by employees, stockholders or other persons. Any person with such a concern should report it to the board as set forth under "Contacting“Contacting the Board"Board” on page 13.15. The audit committee has also adopted procedures for the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters.
The audit committee has established policies and procedures for the pre-approval of all services provided by our independent registered public accounting firm. These policies and procedures are described on page 58pages 58-59 of this proxy statement.
Finance Committee
The finance committee provides guidance to the board and management on significant financial matters, including the Company'sCompany’s capital structure, credit facilities, equity and debt issuances, acquisitions, divestitures, liquidity and liquidity. During 2011 the finance committee held one meeting. The current members of the finance committee are Mr. Beckman (chair), Mr. Graves and Mr. Hill.insurance coverage.
Nominating and Corporate Governance Committee
The nominating and corporate governance committee regularly seeks input from the board regarding the skills and attributes it believes new nominees should possess in order to strengthen the board; identifies and recommends to the board individuals qualified to serve as directors and on committees of the board; advises the board with respect to board and committee procedures; develops and recommends to the board, and reviews periodically, our corporate governance principles; and oversees the evaluation of the board, the committees of the board and management. The committee evaluates the board’s performance at least annually. In addition, each committee conducts an annual self-evaluation and we also conduct a peer review of individual directors every other year. The committee has independent authority to select and retain any search firm to assist it in identifying qualified candidates for board membership, and has the sole authority to approve the search firm'sfirm’s fees and
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terms of engagement. The current members of the nominating and corporate governance committee are Ms. Derickson (chair), Ms. Brubaker and Mr. Graves, each of whom is independent under NYSE listing standards. During 2011 the nominating and corporate governance committee held two meetings and acted once by written consent.
The nominating and corporate governance committee believes that each nominee for director should demonstrate, by significant accomplishment in his or her field, an ability to make a meaningful contribution to the board'sboard’s supervision and oversight of our business and affairs. The committee also considers the following when selecting candidates for recommendation to the board: broad business knowledge, experience, professional relationships, expertise, diversity, personal and professional integrity, character, business judgment, time availability in light of other commitments, dedication, potential conflicts of interest and such other relevant factors that the committee considers appropriate in the context of the needs or stated requirements of the board.
We do not have a formal policy with regard to consideration of diversity in identifying director nominees. However, both the charter of the nominating and corporate governance committee and our corporate governance guidelines list diversity as one of many attributes and criteria that the committee will consider when identifying and recruiting candidates to fill positions on the board. Our corporate governance guidelines also state that our board should generally have no fewer than ten directors to permit diversity of experience. The committee considers a broad range of diversity, including diversity with respect to experience, skill set, areas of expertise and professional background, as well as race, gender and national origin. Our informal policy regarding consideration of diversity is implemented through discussions among the committee members, and by the committee with our outside search firm and with senior management. The committee assesses the effectiveness of this policy through its annual self-evaluation, a report of which is delivered to the board. Every board candidate search undertaken by us includes diversity as a desired attribute for the candidate.
All nominees for election to the board are currently serving as directors, and have served on our board for between sixteen months to almost eleven years. In concluding that our current directors should continue to serve on our board, we considered the following attributes of our directors, which we have observed during the tenure of our directors' service: extensive familiarity with large-scale operations; industry expertise and professional relationships; the ability to utilize extensive past experience in management, finance, technology and operations, and other areas, to address issues we face on a recurring basis; collegiality and the ability to work together as a group; outstanding integrity and business judgment; and the ability to ask probing questions during board discussions and to carefully scrutinize significant business, financing and other proposals suggested by management. In addition to these factors and those mentioned in the preceding paragraph, we also considered the following in concluding that our current directors should continue to serve on our board:
Mr. Berges: chairman and CEO of Hexcel for more than ten years. Prior to becoming CEO of Hexcel, had 30 years management and operations experience at GE, Barnes Group and Honeywell, including three years as President of the Automotive Group at Honeywell International Inc., a $2.5 billion business with over 10,000 employees.
Mr. Beckman: ten years' experience as managing partner of, and a founder of, Greenbriar Equity Group, a private equity firm that invests exclusively in transportation (including aerospace) companies; 18 years' experience at Goldman Sachs, where he founded the global transportation business group. In addition to Mr. Beckman's valuable contributions related to the transportation sector, his experience in private equity led to his appointment as chair of the finance committee and has made him a key contributor to refinancing discussions since joining the board.
Ms. Brubaker: over 30 years' experience in the commercial aerospace, defense and space industries, in a variety of executive, operations, sales, marketing, customer support and independent consultant roles. Ms. Brubaker's experience runs the gamut from operator, to airframer, to original
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equipment manufacturer, to aftermarket. Her ongoing aerospace industry involvement and relationships provide the board with additional customer feedback independent of management. Ms. Brubaker has used her expertise in sales and marketing management to assess, advise and mentor our sales management.
Mr. Campbell: extensive experience in finance and accounting, including his current role as CFO of McKesson, a $100 billion healthcare services company; over ten years in executive and management positions in the aerospace industry (American Airlines). Mr. Campbell's financial acumen has made him a valuable audit committee contributor (Mr. Campbell is chair of our audit committee), and due to his experience as CFO of a major public company he has provided valuable expertise and guidance in areas such as compliance, risk management, financing, investor relations and systems solutions.
Ms. Derickson: 30 years' executive and global operating experience with HSBC and General Electric, including overseeing acquisitions, start-ups and restructurings. Ms. Derickson's long career with large international companies provides important "best practice" perspectives in such areas as manpower development, succession planning, organizational design and growth. Ms. Derickson was our first director added after we identified diversity as a desired attribute for directors. As chair of the nominating and corporate governance committee she has led the development of a better balanced board, and scheduled corporate governance training for all directors.
Mr. Foster: over 30 years' management, operations and finance experience with FMC Corporation, an NYSE-listed chemical manufacturer, including the last seven years as CFO as well as experience as a director of another public company. Mr. Foster has been a valuable member of the audit committee since joining the board. He provides expertise and advice in the finance and investor relations areas, and his background in chemical operations has proven valuable in connection with discussions of capital spending and global sourcing.
Mr. Gendron: experience as president and CEO of a NASDAQ-listed company spanning eight years; extensive operations and marketing experience in the aerospace and wind power industries. Mr. Gendron's expertise on wind turbine controls enables him to provide the board with insight as to the wind power industry, and offer guidance on the development of marketing strategies. In addition, Mr. Gendron's management experience at large scale manufacturers makes him well-suited to advise our operations management team.
Mr. Graves: eight years' experience as a CEO of two NYSE-listed companies; significant global operations and R&D experience, including with GE; holds a PhD in Materials Science; extensive prior involvement in materials development and application processes for airframe and propulsion systems; significant experience as a director of other US public companies. In addition to the obvious value as an experienced CEO of two public companies, Mr. Graves was recruited to the board to help fill a critical need for additional technical expertise. He has extensive experience doing business in China and India, enabling him to provide valuable contributions to discussions related to our Asia and Far East strategy, particularly with respect to industrial markets. Each year, Mr. Graves and Mr. Hill have reviewed our R&D programs and organization and reported back to the board their findings and recommendations. In addition, he has advised on information technology projects based on his past experience with the implementation of Enterprise Resource Planning initiatives.
Mr. Hill: over 40 years' management, operations and technology experience in large-scale chemicals and engineered materials organizations, including six years as CEO of Sun Chemical Corporation; extensive knowledge regarding the manufacture and use of carbon fiber; member of the National Association of Corporate Directors. Mr. Hill was selected to provide additional technical expertise, particularly related to large chemical-based fiber facilities. His extensive experience with the application of continuous improvement techniques to maximize capital efficiency has made him a key contributor to the board, particularly in connection with capital expansion, utilization and resources.
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Each year, Mr. Hill and Mr. Graves have reviewed our R&D programs and organization and reported back to the board their findings and recommendations.
Mr. Pugh: CEO of an NYSE-listed company for ten years until retirement in 2011; extensive operations and sales and marketing experience in large-scale manufacturing organizations; and extensive experience as a director of public companies. Mr. Pugh's expertise in factory control systems and equipment maintenance programs has provided valuable expertise to the board and to our operations management team. Mr. Pugh is chair of the compensation committee and brings important perspectives in the executive compensation area to both the compensation committee and the board, as a result of his varied experiences with other public boards.
The nominating and corporate governance committee will consider director candidates recommended by stockholders, as well as by other means such assources including our non-management directors, our chief executive officer, and other executive officers. In considering candidates submitted by stockholders, the committee will take into consideration the needs of the board and the qualifications of the candidate. The company'scompany’s policy on the consideration of all director candidates, regardless of source, is set forth in the charter of the nominating and corporate governance committee. To have a candidate considered by the committee, a stockholder must submit the recommendation in writing to our corporate secretary at the address listed below under "Contacting“Contacting the Board"Board” so that it is received at least 120 days prior to the anniversary date of our prior year'syear’s annual meeting of stockholders. The stockholder must supply the following information with his or her recommendation:
The name and record address of the stockholder and evidence of the stockholder'sstockholder’s ownership of Hexcel stock, including the class and number of shares owned of record or beneficially by the stockholder or any of its affiliates or associates (and including any other direct or indirect pecuniary or economic interest in Hexcel stock)stock, such as any derivative instrument, swap, option, warrant, short interest, hedge or profit sharing arrangement) and the length of time the interest in the shares have been held
The name, age, business address and residence address of the candidate, a listing of the candidate'scandidate’s qualifications to be a director, and the person'sperson’s consent to be named as a director if selected by the committee and nominated by the board
An advance irrevocable resignation letter providing for the contingent resignation of the candidate in the event that the candidate is elected to the board and subsequently becomes a holdover director
The candidate’s written representation and agreement that the candidate (1) would be in compliance, if elected as a director of Hexcel, and will comply with, all applicable publicly disclosed confidentiality, corporate governance, conflict of interest, Regulation FD, code of conduct and ethics, and stock ownership and trading policies and guidelines of Hexcel, (2) is not and will not become a party to any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how the candidate, if elected as a director of Hexcel, will act or vote on any issue or question that has not been disclosed to Hexcel in the representation and agreement, and (3) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than Hexcel with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director of Hexcel without disclosing to Hexcel such agreement, arrangement or understanding
Any information about the stockholder and the candidate which would be required to be disclosed in a proxy statement or other filing relating to the election of directors
A representation that the stockholder intends to appear in person at the annual meeting to nominate the candidate
Any material interest of the stockholder or any of its affiliates or associates relating to the nomination of the candidate, including a description of all arrangements or understandings between the stockholder and the candidate
Whether any other transaction, agreement, arrangement or understanding (including any short position or any borrowing or lending of shares) has been made by or on behalf of the stockholder or any of its affiliates or associates, the effect or intent of which is to mitigate loss to, or manage risk or benefit of share price changes for, the stockholder or any of its affiliates or associates or to increase or decrease the voting power or pecuniary or economic interest of the stockholder or any of its affiliates or associates with respect to Hexcel’s capital stock
A description of all arrangements or understandings between the stockholder or any of its affiliates or associates and any other person, naming such other person, relating to the recommendation of such candidate
The committee'scommittee’s evaluation process does not vary based on whether or not a candidate is recommended by a stockholder, although the board may take into consideration the number of shares held by a recommending stockholder and the length of time that such shares have been held. No stockholder recommendations were made for this Annual Meeting.
Compensation Committee
The compensation committee oversees,defines the goals of our compensation policy, reviews and approves our compensation and oversees our benefit plans and programs and defines the goals of our compensation policy.plans. In this capacity, the compensation
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committee administers our incentive plans and may make grants, for example, of non-qualified stock options ("NQOs"(“NQOs”), restricted stock units ("RSUs"(“RSUs”) and performance-based share awards ("PSAs"(“PSAs”) to executive officers, other key employees, directors and consultants. The current members of the compensation committee are Mr. Pugh (chair), Mr. Beckman, Ms. Derickson and Mr. Gendron, each of whom is independent under NYSE listing standards. During 2011 the compensation committee held seven meetings and acted once by written consent.
Additional information regarding the compensation committee, including additional detail about the objectives, policies, processes and procedures of the compensation committee, and information with regard to the compensation consultant retained by the compensation committee, which includes a description of all services provided, is set forth in Compensation Discussion and Analysis beginning on page 1921 of this proxy statement.
As stated in our Corporate Governance Guidelines, we do not require separation of the offices of the Chairman of the Board and Chief Executive Officer. The board believes that it is appropriate for Mr. BergesStanage to hold both offices because the combined role enables decisive leadership and clear accountability and enhances our ability to communicate our strategy clearly and consistently to stockholders and other key constituencies, such as our employees and key customers and suppliers. We also believe we have in place sound counter-balancing mechanisms to ensure that we maintain the highest standards of corporate governance and effective accountability of the CEO to the board, including the following:
Each of the ten other nine directors on the board is independent
The board has named a presidinglead director, whose responsibilities are described in detail below
Mr. Berges'Stanage’s performance and compensation is reviewed, and Mr. Berges'Stanage’s compensation is set, by the compensation committee, with formal oversight by the independent directors as a group
The independent directors meet regularly in regular executive sessions without management
The board provides oversight ofregularly reviews performance, management development and succession planningplans for executive positions.
As noted above, our board has a presiding director. IfOur bylaws dictate that if the chairman of the board is independent, then the chairman will be the presiding director. Iflead director or, if the chairman is not independent, as is the case with Mr. Berges,Stanage, then the independent directors are required to designate an independent board member to serve as presidinglead director. The independent directors have designated Ms. DericksonMr. Foster to serve as presidinglead director. Ms. DericksonMr. Foster has the authority to call a meeting of the independent directors in addition to the responsibilities listed below. Some of these responsibilities are performed by Ms. Derickson in her capacity as the chair of the nominating and corporate governance committee.
Oversees the flow of information to the board
Determines the agenda for board meetings with input from management and other directors
Oversees the board'sboard’s performance evaluations of the CEO and provides feedback directly to the CEO
Supervises the board and committee annual self-evaluation process
Chairs executive sessions of the board and meets with the CEO to discuss matters of board concern
Collaborates with the nominating and corporate governance committee in monitoring the composition and structure of the board and leads director recruitment efforts.
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Under our corporate governance guidelines, the independent directors are required to meet as a board in executive session, without management, a minimum of two times a year, but normally do so at every regular board meeting.
The board is responsible for overseeing our risk management. The board sets our risk management strategy and oversees the implementation of our risk management framework. Specific board committees are responsible for overseeing specific types of risk. Our audit committee periodically reviews our insurance coverage, currency exchange and hedging policies, tax exposures and our processes to ensure compliance with laws and regulations, and also reviews reports from our anonymous hotline that employees can use to report suspected violations of our Code of Business Conduct. The audit committee also regularly meets in executive sessions without management present with our outsourced internal audit firm and our independent registered public accounting firm to discuss areas of concern of which the board should be aware. The board, and when specific need arises, the finance committee, addresses significant financing matters such as our capital structure, credit facilities, equity and debt issuances, acquisitions and divestitures, liquidity and liquidity.insurance programs. Our compensation committee establishes compensation policies and programs that do not incentivize executives and employees to take on an inappropriate level of risk, as discussed under "The“The Process for Setting Compensation—Compensation Risk Oversight"Oversight” on page 2526 of this proxy statement. The nominating and corporate governance committee is responsible for ensuring that we have an adequatemaking recommendations to the board regarding succession plan in placeplanning for our senior leadership.leadership positions. Each of our board committees delivers a report to the board, at the next board meeting, regarding matters considered at committee meetings that have taken place since the last board meeting.
Our Corporate Controllersenior management meets periodically with our operationsfunctional leadership teams to discuss and review the risks that exist in connection with our business. Management makes regular presentations to the board, no lessfewer than two times per year (and more frequently if circumstances warrant), regarding all types of material risks facing the company. At these meetings the board discusses and reviews these risks and determines what, if any, new actions should be taken to mitigate these risks.
At least annually, the board engages in a review of management developmental and succession planning to assess employeeleadership development programs and organizational effectiveness, and conducts in-depth discussions regarding specific succession and contingency planning for all key senior leadership positions.
Stockholders and other interested parties may contact the non-management members of the board or the presidinglead director by sending their concerns to: Board of Directors, c/o Corporate Secretary, Hexcel Corporation, Two Stamford Plaza, 281 Tresser Boulevard, Stamford, CT 06901; facsimile number (203) 358-3972; e-mail addressboardofdirectors@hexcel.com. The Corporate Secretarycorporate secretary will review all communications and forward them to the presidinglead director. The Corporate Secretarycorporate secretary may, however, filter out communications that do not relate to our business activities, operations or our public disclosures, but will maintain a record of these communications and make them available to the presidinglead director. Any communications received by the presidinglead director regarding concerns relating to accounting, internal accounting controls or auditing matters will be immediately brought to the attention of the audit committee and will be handled in accordance with the procedures established by the audit committee to address these matters.
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It is our policy that all of our officers, directors and employees worldwide conduct our business in an honest and ethical manner and in compliance with all applicable laws and regulations. Our board has adopted the Hexcel Code of Business Conduct in order to clarify, disseminate and enforce this policy. The Code applies to all of our officers, directors and employees worldwide, including our chief executive officer, chief financial officer and controller. The Code can be viewed on the investor relations section of our website,www.hexcel.com, under "Corporate“Corporate Governance."” In addition, you may obtain a free copy of the Code by directing your request to
Hexcel Corporation, Attention: Investor Relations Manager, Two Stamford Plaza, 281 Tresser Boulevard, Stamford, CT 06901, telephone (203) 352-6826. Any amendment to the Code of Business Conduct (other than technical, administrative or non-substantive amendments), or any waiver of a provision of the Code that applies to our directors or executive officers, will be promptly disclosed on the investor relations section of our website under "Corporate“Corporate Governance."
Director Compensation in 2011
2014
Our non-employee director compensation program is comprised of a mix of cash and stock-based incentive compensation designed to attract and retain qualified candidates to serve on our board. In May 2014, the board performed its annual review of the director compensation program compared with survey data from the National Association of Corporate Directors (“NACD”). The program provides for:review indicated that despite increases in annual compensation made in 2012 and 2013, our directors were still compensated below the median of the compensation level indicated by the NACD survey. The compensation committee had previously concluded it was important that directors be competitively compensated at the median level determined in the NACD survey and therefore recommended that the board approve a $10,000 increase to the annual cash compensation. The recommendation of the committee was adopted by the board, effective July 1, 2014.
Annual non-employee director cash compensation consists of a retainer of $48,000 payable quarterly
$25,000 for the presidinglead director
$12,500 for the audit committee chair
$7,500 for the compensation committee chair
$5,000 for each of $5,000 paid to the nominating and corporate governance committee and the finance committee chairs
$10,000 paid to each member of the audit committee (including the chair of the committee)
$7,500 paid to each member of the compensation committee (including the chair of the committee)
$5,000 paid to each member of the nominating and corporate governance committee and the finance committee (including the chairs of the committees)
Retainer payments were prorated for the second half of $1,000 for attendance at meeting of a special board committee that is formed for a specific purpose
Upon initial election to the board and on each re-election thereafter,
This programIn addition to the annual compensation described above, if a special committee is designated by the board, each non-employee director of that special committee receives $1,000 for our non-employee directors only. Mr. Berges receives no additional compensation for serving on our board.attendance at a meeting.
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Our stock ownership guidelines, which are described on page 34,36, apply to outsidenon-employee directors in a similar manner as they apply towell as executive officers. EachIn May 2014, the board approved an amendment to the stock ownership guidelines to require each non-employee director is expected to own shares of our common stock that have a value equal tovalued at least threefive times his or her annual cash retainer. All of our non-employee directors are in full compliance with the policy, except for Mr. Hachey and Ms. Egnotovich who were elected to the board in October 2014 and January 2015, respectively.
The table below summarizes the compensation paid by the company to non-employee Directorsdirectors for the fiscal year ended December 31, 2011.
Name(1) | Fees Earned or Paid in Cash ($) | Stock Awards ($)(2)(3) | Total ($) | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
Joel S. Beckman | 65,500 | 64,997 | 130,497 | |||||||
Lynn Brubaker | 62,128 | 64,997 | 127,125 | |||||||
Jeffrey C. Campbell | 70,500 | 64,997 | 135,497 | |||||||
Sandra L. Derickson | 78,000 | 64,997 | 142,997 | |||||||
W. Kim Foster | 58,000 | 64,997 | 122,997 | |||||||
Thomas A. Gendron | 55,500 | 64,997 | 120,497 | |||||||
Jeffrey A. Graves | 58,000 | 64,997 | 122,997 | |||||||
David C. Hill | 62,250 | 64,997 | 127,247 | |||||||
David C. Hurley(4) | 20,062 | 0 | 20,062 | |||||||
David. L. Pugh | 63,000 | 64,997 | 127,997 | |||||||
| | RSUs(a) | Shares Underlying Unexercised NQOs(b) | |||||
|---|---|---|---|---|---|---|---|
Joel S. Beckman | 19,815 | (c) | — | ||||
Lynn Brubaker | 3,143 | — | |||||
Jeffrey C. Campbell | 21,318 | 10,000 | |||||
Sandra L. Derickson | 16,816 | — | |||||
W. Kim Foster | 16,174 | — | |||||
Thomas A. Gendron | 6,730 | — | |||||
Jeffrey A. Graves | 16,054 | — | |||||
David C. Hill | 13,976 | — | |||||
David L. Pugh | 19,566 | — | |||||
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2014.
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1)(2) | Total ($) | |||||||||
Joel S. Beckman | 70,500 | 104,960 | 175,460 | |||||||||
Lynn Brubaker | 73,000 | 104,960 | 177,960 | |||||||||
Jeffrey C. Campbell | 75,500 | 104,960 | 180,460 | |||||||||
Sandra L. Derickson | 65,500 | 104,960 | 170,460 | |||||||||
W. Kim Foster | 93,000 | 104,960 | 197,960 | |||||||||
Thomas A. Gendron | 60,500 | 104,960 | 165,460 | |||||||||
Jeffrey A. Graves | 63,000 | 104,960 | 167,960 | |||||||||
Guy C. Hachey | 14,939 | 104,975 | 119,914 | |||||||||
David C. Hill | 68,000 | 104,960 | 172,960 | |||||||||
David. L. Pugh | 68,000 | 104,960 | 172,960 | |||||||||
| (1) | The grant date fair value of each RSU granted to directors other than Mr. Hachey was $41.85, computed in accordance with FASB ASC Topic 718. The grant date fair value of each RSU granted to Mr. Hachey on October 9, 2014, the date he joined the Board, was $38.27. These amounts do not correspond to the actual value that will be realized by a director. For additional information regarding the assumptions made in calculating these amounts, see Note 10, “Stock-Based Compensation,” to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2014. |
| (2) | As of December 31, 2014, our non-employee directors had RSUs outstanding as follows: |
| Outstanding RSUs(a) | ||||
Joel S. Beckman | 29,271(b) | |||
Lynn Brubaker | 2,508 | |||
Jeffrey C. Campbell | 30,774 | |||
Sandra L. Derickson | 16,181 | |||
W. Kim Foster | 25,630 | |||
Thomas A. Gendron | 16,186 | |||
Jeffrey A. Graves | 25,510 | |||
Guy Hachey | 2,743 | |||
David C. Hill | 16,484 | |||
David L. Pugh | 29,022 | |||
| (a) | All RSUs granted prior to the 2014 annual meeting are vested. Vested RSUs remain outstanding if the director has elected to defer conversion into shares until such time as the director ceases to be a member of the board. Each director (other than Ms. Brubaker, Ms. Derickson, Mr. Foster and Dr. Hill) elected to defer the conversion of his or her RSUs granted in 2014. |
| (b) | Includes 1,590 RSUs held for the benefit of Greenbriar Equity Group LLC. Mr. Beckman disclaims beneficial ownership of these RSUs. |
Set forth below is certain information concerning each of our current executive officers.officers in 2014. For additional information concerning Mr. Berges,Stanage, see "PROPOSAL“PROPOSAL 1—ELECTION OF DIRECTORS—Information Regarding the Directors"Directors” on page 4.
Name | Age on March 15, 2012 | Executive Officer Since | Position(s) With Hexcel | |||||
|---|---|---|---|---|---|---|---|---|
David E. Berges | 62 | 2001 | Chairman of the Board; Chief Executive Officer; Director | |||||
Nick L. Stanage | 53 | 2009 | President | |||||
Wayne C. Pensky | 56 | 2007 | Senior Vice President; Chief Financial Officer | |||||
Ira J. Krakower | 71 | 1996 | Senior Vice President; General Counsel; Secretary | |||||
Robert G. Hennemuth | 56 | 2006 | Senior Vice President, Human Resources | |||||
NICK L. STANAGE has served as our President since November 2009. Prior to joining Hexcel, Mr. Stanage was President of the Heavy Vehicle Products group (including both Commercial Vehicle Products and Off Highway Products) at Dana Holding Corporation from December 2005 to October 2009, and served as Vice President and General Manager of the Commercial Vehicle group at Dana from August 2005 to December 2005. Dana Holding Corporation and a number of its US subsidiaries filed for bankruptcy protection in March 2006, and emerged from bankruptcy in January 2008. From 1986 to 2005, Mr. Stanage held a variety of technical, marketing and management positions with Honeywell International Inc. (formerly AlliedSignal Inc.), including Vice President and General Manager of the Engine Systems & Accessories business unit in the aerospace group from January 2005 to August 2005, and Vice President Integrated Supply Chain & Technology of the Consumer Products Group from 2003 to January 2005. Prior to joining AlliedSignal, Mr. Stanage worked as a design engineer for Clark Equipment Company.5.
Name | Age on March 19, 2015 | Executive Officer Since | Position(s) With Hexcel | |||||||
Nick L. Stanage | 56 | 2009 | Chairman of the Board; Chief Executive Officer; President; Director | |||||||
Wayne C. Pensky | 59 | 2007 | Senior Vice President; Chief Financial Officer | |||||||
Ira J. Krakower | 74 | 1996 | Senior Vice President; General Counsel; Secretary | |||||||
Robert G. Hennemuth | 59 | 2006 | Senior Vice President, Human Resources | |||||||
WAYNE C. PENSKY has served as our Senior Vice President and Chief Financial Officer since April 2007. Prior to serving in his current role, Mr. Pensky served as Vice President, Finance and Controller of our Composites global business unit since 1998. From 1993 to 1998 Mr. Pensky was our Corporate Controller and Chief Accounting Officer. Prior to joining Hexcel in 1993, Mr. Pensky was a partner at Arthur Andersen & Co., where he had been employed since 1979.
IRA J. KRAKOWER has served as our Senior Vice President, General Counsel and Secretary since September 1996. Prior to joining Hexcel, Mr. Krakower served as Vice President and General Counsel to Uniroyal Chemical Corporation from 1986 to August 1996 and served on the board and as Secretary of Uniroyal Chemical Company, Inc. from 1989 to 1996.
ROBERT G. HENNEMUTH has served as our Senior Vice President, Human Resources since March 2006. Prior to joining Hexcel, Mr. Hennemuth served as Vice President—Human Resources of Jacuzzi Brands, Inc. from July 2003 to September 2005. Previously, he was employed by Honeywell International Inc., (formerly known as AlliedSignal Inc.), where he served as Vice President of Human Resources & Communications for various businesses from December 1996 to June 2003, including the Honeywell Consumer Products Group.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Stock Beneficially Owned by Principal Stockholders
The following table sets forth certain information as of February 29, 201227, 2015 with respect to the ownership by any person (including any "group"“group” as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934 (the "Exchange Act"“Exchange Act”)) known to us to be the beneficial owner of more than five percent of the issued and outstanding shares of Hexcel common stock:
Name and Address | Number of Shares of Common Stock(1) | Percent of Common Stock(1) | |||||
|---|---|---|---|---|---|---|---|
Lord, Abbett & Co. LLC(2) | 5,327,966 | 5.35 | % | ||||
90 Hudson Street | |||||||
BlackRock Inc.(3) | 5,670,482 | 5.70 | % | ||||
40 East 52nd Street | |||||||
Earnest Partners LLC(4) | 5,044,310 | 5.07 | % | ||||
1180 Peachtree Street NE, Suite 2300 | |||||||
Name and Address | Number of Shares of Common Stock(1) | Percent of Common Stock(1) | ||||||
The Vanguard Group(2) | 5,723,744 | 5.9% | ||||||
100 Vanguard Boulevard | ||||||||
Malvern, PA 19355 | ||||||||
Capital International Investors(3) | 5,836,980 | 6.1% | ||||||
333 South Hope Street | ||||||||
Los Angeles, CA 90071 | ||||||||
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| (1) | “Number of Shares” is based on information contained in a Statement on Schedule 13D, 13D/A, 13G or 13G/A filed with the SEC as indicated in footnote (2) below. The “Percent of Common Stock” is based on such number of shares and on 96,337,736 shares of common stock issued and outstanding as of February 27, 2015. |
| (2) | Based on information contained in a Statement on Schedule 13G/A filed with the SEC on February 10, 2015. Based on the Schedule 13G/A, The Vanguard Group is an investment advisor that has sole voting power with respect to 64,165 shares, sole dispositive power with respect to 5,666,979 shares and shared dispositive power with respect to 56,765 shares. |
| (3) | Based on information contained in a Statement on Schedule 13G filed with the SEC on February13, 2015. Based on the Schedule 13G, Capital International Investors is an investment advisor that has sole voting power with respect to 4,811,158 shares, sole dispositive power with respect to 5,836,980 shares. |
The following table contains information regarding the beneficial ownership of shares of Hexcel common stock as of February David E. Berges(4) Joel S. Beckman(5) Lynn Brubaker Jeffrey C. Campbell Sandra L. Derickson(6) W. Kim Foster Thomas A. Gendron Jeffrey A. Graves David Hill David L. Pugh Nick L. Stanage Wayne C. Pensky Ira J. Krakower Robert G. Hennemuth All executive officers and directors as a group (14 persons) Name Nick L. Stanage Joel S. Beckman(4) Lynn Brubaker Jeffrey C. Campbell Cynthia M. Egnotovich W. Kim Foster Thomas A. Gendron Jeffrey A. Graves Guy C. Hachey David Hill(5) David L. Pugh Wayne C. Pensky Ira J. Krakower Robert G. Hennemuth All executive officers and directors as a group (14 persons)
Stock Beneficially Owned by Directors and Officers29, 201227, 2015 by our current directors and the executive officers listed in the Summary Compensation Table below, and by all directors and executive officers as a group. The information appearing under the heading "Number“Number of Shares of Common Stock"Stock” was supplied to us by the persons listed in the table.Name Number of Shares
of Common Stock(1) Percent of
Common Stock(2)(3) 1,763,891 1.8% 21,275 * 13,890 * 31,275 * 44,064 * 16,131 * 16,687 * 16,011 * 13,933 * 24,523 * 152,545 * 281,579 * 457,299 * 171,393 * 3,024,496 3.0% (1)Includes shares underlying stock-based awards that either were vested as of February 29, 2012, or will vest within 60 days of this date. These shares are beneficially owned as follows: Mr. Berges 1,030,002; Mr. Beckman 19,772; Ms. Brubaker 3,100; Mr. Campbell 31,275; Ms. Derickson 16,773; Mr. Foster 16,131; Mr. Gendron 6,687; Mr. Graves 16,011; Mr. Hill 13,933; Mr. Pugh 19,523; Mr. Stanage 70,473; Mr. Pensky 182,991; Mr. Krakower 226,686; Mr. Hennemuth 114,106; and all executive officers and directors as a group 1,767,463. None of our directors or named executive officers has pledged any of our common stock as security.(2)Based on 99,549,257 shares of common stock issued and outstanding as of February 29, 2012. As required by SEC rules, for each individual person listed in the chart the percentage is calculated assuming that the shares listed in footnote (1) above for such person are outstanding, but that none of the other shares referred to in footnote (1) above are outstanding.(3)An asterisk represents beneficial ownership of less than 1%.(4)Includes 99,172 shares held by the Berges Family Trust and 65,902 shares held by the Berges 2009 Grantor Retained Annuity Trust I. Mr. Berges has investment and voting control over such shares. Also includes 500 shares held by Mr. Berges' spouse.(5)Includes 1,590 shares underlying stock-based awards granted to Mr. Beckman that are held for the benefit of Greenbriar Equity Group LLC. Mr. Beckman disclaims beneficial ownership of these shares.(6)Includes 27,291 shares held by the Derickson Revocable Trust. Ms. Derickson has investment and voting control over such shares. Number of Shares
of Common Stock(1) Percent of
Common Stock(2)(3) 369,780 * 29,208 * 9,393 * 38,514 * 747 * 25,567 * 38,123 * 25,447 * 1,521 * 19,921 * 60,959 * 357,004 * 483,749 * 149,722 * 1,608,134 1.7 % 18(1) Includes shares underlying stock-based awards that either were vested as of February 27, 2015, or will vest within 60 days of this date. These shares are beneficially owned as follows: Mr. Stanage 219,990; Mr. Beckman 29,208; Ms. Brubaker 2,445; Mr. Campbell 30,711; Ms. Egnotovich 747; Mr. Foster 25,567; Mr. Gendron 16,123; Dr. Graves 25,447; Mr. Hachey 1,521; Dr. Hill 16,421; Mr. Pugh 28,959; Mr. Pensky 269,164; Mr. Krakower 237,102; Mr. Hennemuth 99,296; and all executive officers and directors as a group 1,001,180. None of our directors or named executive officers has pledged any of our common stock as security. (2) Based on 96,337,736 shares of common stock issued and outstanding as of February 27, 2015. As required by SEC rules, for each individual person listed in the chart the percentage is calculated assuming that the shares listed in footnote (1) above for such person are outstanding, but that none of the other shares referred to in footnote (1) above are outstanding. (3) An asterisk represents beneficial ownership of less than 1%. (4) Includes 1,590 shares underlying stock-based awards granted to Mr. Beckman that are held for the benefit of Greenbriar Equity Group LLC. Mr. Beckman disclaims beneficial ownership of these shares. (5) Includes 3,500 shares held by the David C. Hill Trust. Dr. Hill has investment and voting control over such shares.
COMPENSATION DISCUSSION AND ANALYSIS
This section describes and analyzes the material elements of 20112014 compensation for our executive officers identified in the Summary Compensation Table on page 39.40. We refer to these individuals as the named executive officers, or "NEOs."“NEOs.” The compensation committee of the board of directors is responsible for determining the compensation and benefits of the NEOs. The committee's approvalcommittee’s determination of the compensation of our CEO is subject to ratification by our independent directors.
In setting NEO compensation for 2011,2014, the committee focused on the alignment of pay and performance, with short-term and long-term goals designed to incentivize improvements in key financial measures. Our 2014 results demonstrate such alignment. We delivered Hexcel’s strongest full year results for sales, gross margin, operating income, and adjusted net income in 2014, building on similar achievements in 2012 and 2013. At the same time, we continued to make significant investments in new products, research and technology, and global manufacturing capacity to meet customer demand. Our year-over-year net sales increased 10.6%, which we leveraged into a 15% increase in adjusted operating income, equal to 16.8% of sales. Our strong performance was reflected in a 16.8% increase in our Adjusted Diluted Earnings per Share. Cash from Operating Activities grew by 16.5% over the prior measurement period, which maintained our ability to fund investments in 2014 to meet projected customer demand. Our strong after-tax return on invested capital, or ROIC, from 2012-2014 of 15.2% demonstrates our focus on timely and well-executed capacity growth. See “Pay for Performance—MICP Annual Cash Incentive” on page 24 and “—Performance Based Share Awards” on pages 24-25 for a description of these metrics as they relate to our cash incentive awards.
In addition, the committee considered the results of the stockholder advisory vote on executive compensation held at our Annual Meeting2013 annual meeting of Stockholders last year,stockholders, at which approximately 90%over 91% of the votes cast were for approval of our executive compensation. In light of the support the proposal received,This was one factor considered by the committee determined that we shouldin its decision to maintain the principles underlying our existing compensation strategy.
Executivestrategy for 2014. Furthermore, in evaluating the NEOs’ performance in 2014 and setting compensation for 2011 aligned well with2015, the primary objectives of our compensation philosophy, which are:
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The following chart shows the elements of our target compensation for our NEOs. The target compensation is a combination of fixed and variable components, including salary, annual cash incentive awards granted under our Management Incentive Compensation Plan ("MICP"), and equity awards in the form of restricted stock units ("RSUs"), non-qualified stock options ("NQOs") and performance share awards ("PSAs").
We continued to achieve outstanding results in 2011, as we leveraged an 18.6% increase in year-over-year net sales from 2010 into a 42.8% increase in Adjusted EBIT. Our strong performance resulted in a 59.0% increase in our Adjusted Diluted Earnings per Share, which was solelycommittee considered the result of the stockholder advisory vote on executive compensation held at our increased earnings as we did not engage in any share repurchase program. Cash from operating activities grew by 34.8%2014 annual meeting of stockholders, at which over 96% of the prior year, which helped fund the planned increase in capital expenditures to meet projected customer demand. After these capital outlays, the resulting Free Cash Flow was down as compared with the prior measurement period, but greatly exceeded targeted levels. See "Payvotes cast were for Performance—MICP—2011 MICP Performance" on page 23. Our 2011 performance resulted in total stockholder return ("TSR") for 2011 of 33.8%. The table below shows our 2011 performance compared with our 2010 performance for the 2011 MICP measures.
Measure(1) | 2011 Actual | 2010 Actual | Increase/Decrease | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
| | (Millions) | | ||||||||
Free Cash Flow | $ | 52.6 | $ | 94.2 | (44.2 | )% | ||||
Adjusted EBIT | $ | 190.3 | $ | 133.3 | 42.8 | % | ||||
Adjusted Diluted Earnings per Share | $ | 1.24 | $ | 0.78 | 59.0 | % | ||||
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Key pay decisions in 2011 included:
We continue to believe that achieving long-term success depends on retaining the support of knowledgeable employees who remain motivated by long-term rewards. Our program delivers compensation through direct pay elements such as salary, short-term cash incentive awards and long-term equity incentives. Additionally, we believe that when executives own a meaningful amount of equity, it creates better alignment with stockholder interests, so we require allapproval of our NEOs to meet specified ownership guidelines for our common stock, and we prohibit our NEOs from hedging our stock. NEOs who have not yet met ownership guidelines are limited in their ability to sell vested shares. We believe that the long tenure of our NEOs (the average tenure is over ten years) and their demonstrated commitment to the long-term performance of the company (NEOs hold their NQOs for an average of almost six years), reflects the effectiveness of our compensation strategy.executive compensation.
We recognize that our stockholders invest in the company with the expectation that we will deliver a level of performance that creates value. We seek to deliver sustainable value, meaning that our actions to generate short-term results should further ourbe balanced with the need for investments in technologies, capabilities, products, markets and employees in order to increaseprovide increased profitability over the long-term.
When evaluating the appropriateness of our executive compensation for 20112014 relative to our performance, the following considerations are relevant:
Did our profitabilityperformance generate meaningful improvement in TSR?
Did our selection of short-term and long-term financial objectives create the appropriate incentives to deliver year-over-year improvement and increasing TSR?
Are we investinvesting our capital and resources prudently in order to (1) deliver on current and future customer commitments; (2) continue to develop technologies, products, processes and solutions to meet the future needs of customers; (3) capture future sales with existing customers, and in new markets with new customers; and (4) generate operating returns that exceed our cost of capital?
As explained below, we believe the answer to these questions is "yes."“yes.”
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Total Stockholder Return
Our CEO'sTotal Stockholder Return (“TSR”) is one reflection of company performance. The long-term compensation of our CEO is closely aligneddesigned to correlate with our TSR performance because over 55%50% of histarget compensation consists of equity awards, and our stock ownership guidelines require a significant holding of equity. However, TSR can be affected by external forces beyond the company’s control that may not reflect the operating performance and profitability of the company over the measurement period. This occurred in 2014, where, despite setting company records for sales, adjusted operating income and net income, our TSR for the period January 1 through December 31, 2014 was -7.2%. Although our TSR was negative in 2014, we achieved a TSR of 65.8% in 2013, and our three-year TSR for the period ending December 31, 2014 was 53.9%. In addition, our ROIC for the three year period ending December 31, 2014 was 15.2%. (See “—Performance Based Share Awards” on page 24 for a description of ROIC). This reinforces our belief that it is more appropriate to tie our CEO’s compensation to the achievement of short-term and long-term company performance goals that are intended to drive sustained growth in TSR over time. The following chart below shows our five-year cumulative TSR for the five-year period ending December 31, 20112014 compared with our CEO'sCEO’s total direct compensation (“TDC”) for 20072010 through 2011.
COMPARISON CEO2014, which demonstrates a positive correlation between TSR and TDC TO TSR 2007-2011
Unlike TDC, the SEC’s calculation of total compensation, as shown in the proxy statementsSummary Compensation Table set forth on page 40, includes changes in the value of pensions and nonqualified deferred compensation earnings. These changes are not the result of any enhanced benefits under the relevant pension plans or arrangements, but rather reflect valuation methodologies that are driven by accounting and actuarial assumptions, such as the assumed retirement age and the discount rate used to determine the present value of the benefit, as well as by changes in salary and cash incentives paid. These changes and earnings are not necessarily reflective of compensation actually realized by the NEOs for the applicable years ("TDC").
The five-year cumulative TSR shows the increase or decrease in value of a $100 investment in Hexcel common stock made on January 1, 2007,2010, as of the end of each fiscal year in the five-year period.
While TSR is one reflection
The chart shows the TDC for David E. Berges from 2010 through 2013, and the TDC for Mr. Stanage for 2014, the first full year in which he served as CEO. See “2014 Executive Compensation Decisions” for a description of company performance, as shown by the events of 2008, TSRchanges in Mr. Stanage’s compensation between 2013 and 2014.
Compensation Components
Target compensation in 2014 for our NEOs included salary, annual cash incentive awards granted under our Management Incentive Compensation Plan (“MICP”), and equity awards in the short-term can be affected by external forces beyondform of restricted stock units (“RSUs”), non-qualified stock options (“NQOs”) and performance-based share awards (“PSAs”). A significant portion of NEO compensation, ranging from 46% to 52% of total target compensation in 2014, was in the company's control,form of long-term equity incentives. We believe that the long tenure of our NEOs and does not necessarily reflecttheir demonstrated commitment to the operatinglong-term performance of the company. We believe it is appropriate to closely tiecompany (NEOs hold their NQOs for an average of almost six years), reflects the effectiveness of our NEO's compensation tostrategy.
Actual NEO compensation in 2014 included the performance we seek to achieve, by tying variable cash and equity incentives to short-term and long-term financial and operational targets. As a result, our CEO's compensation is aligned with value creation for our stockholders, and therefore the compensation decisions and structure of performance-based compensation have been successful.following elements:
Element | 2014 Pay Action | |
Base Salary | Increased NEO salaries (except for Mr. Stanage) at the start of the year based on individual performance and evaluation against our comparator group. Increases ranged from 3.0% to 5.0%. Mr. Stanage’s base salary was fixed by his offer letter, as described under “2014 Executive Compensation Decisions” on page 29. | |
MICP | Awarded a payout of 137.7% of target under our MICP based on performance against targets for Cash from Operating Activities, Adjusted EBIT and Adjusted Diluted Earnings per Share. See “Pay for Performance—MICP Annual Cash Incentive” below. | |
Equity-Based Awards | Continued our practice of awarding our NEOs a mix of NQOs, RSUs and PSAs with an overall design to provide performance-based incentives aligned with stockholder interests and long-term company strategy. Target equity compensation for Mr. Stanage consisted of 37.5% NQOs and 62.5% PSAs, while the other NEOs’ target equity compensation for 2014 consisted of 25% RSUs, 37.5% PSAs and 37.5% NQOs. See “2014 Executive Compensation Decisions – Equity Awards” on pages 30-33. |
MICP Annual Cash Incentive
Our performance measures for 20112014 MICP awards incentivizedwere designed to incentivize our company leaders to achieve improvements in three areas: Adjusted EBIT, Free Cash Flowfrom Operating Activities and Adjusted Diluted Earnings per Share, with each component given equal weight. This representedIn January 2015, the compensation committee certified the degree of attainment of the 2014 financial measures, which resulted in a change from our MICP approach in 2010 where our Free Cash Flow was given greater weight than other measures, and we included Adjusted Net Income rather than Adjusted Diluted Earnings per Share. By reducingpayout percentage of 137.7% of the emphasis on Free Cash Flow, we encouraged management to focus on results of operations through the Adjusted EBIT component as we increased capital expenditures to meet projected customer demand. By shifting from Adjusted Net Income to Adjusted Diluted Earnings per Share, we sought to align employee interests more closely with stockholder interests by tying employee rewards to the same measure that investors use to gauge our performance.
In December 2010, the committee established performance measuresaggregated target awards for all participants in the MICP, including our NEOs (thereas shown in the graph below. Even though the company achieved record high results under each of these measures in 2013, the 2014 targets were 171 participants overall). Under the 2011 plan, the maximum payout for each performance measure was 200%set in excess of the weighted percentage target award for that measure, with a maximum consolidated total award of 200% of the target award. Nothing is paid based
22
on the relevant measure if the threshold level is not attained. The graph below depicts our2013 actual performance against the threshold, target, and maximum achievement levels setresults by the committeemore than 10% for each of Adjusted EBIT and Adjusted Diluted EPS. The target for Cash from Operating Activities was the only metric set lower than actual results for 2013, due to higher anticipated cash expenditures, including cash taxes and payment of retirement benefits, in 2014. These metrics provided a continued challenge to the management team to build on our 2013 performance, measures:
2011and in 2014, we achieved above-target performance for the Cash from Operating Activities and Adjusted Diluted EPS measures, and were slightly under target for Adjusted EBIT. See “2014 Executive Compensation Decisions – MICP Performance
"Free
The following GAAP and non-GAAP financial measures were used to measure performance for our 2014 annual cash incentive awards granted under the MICP:
“Cash Flow"from Operating Activities” means cash provided by operating activities of continuing operations less capital expenditures from the consolidated statement of cash flows, measured from September 30, 20102013 to December 31, 2011.2014.
"Adjusted EBIT"“Adjusted EBIT” means operating income plus the sum of business consolidation and restructuring expense and other expenses (income) and eligible severance payments.
"Adjusted“Adjusted Diluted Earnings per Share"Share” means the quotient of Adjusted EBIT minus interest expense minus income taxes, as adjusted, divided by the weighted average number of diluted shares of common stock outstanding.
After performing appropriate due diligence,Performance-Based Share Awards
The PSAs awarded in January 2012 the committee certified the degree of attainment of the financial measures for the 2011 MICP, which resulted in a payout percentage of 177.5% of the aggregate target for the MICP participant pool.
23
Performance Share Awards
Given our significant capital investment, one measure of our long-term success is ourused Return on Invested Capital, or "ROIC". See page 31, under "2011-2013 PSAs" for a description of how this non-GAAP financial measure is calculated from the company's audited financial statements. Accordingly, beginning in 2011, part of our long-term compensation (our PSAs) takes into account a three year measurement of ROIC. For the 2007-2009, 2008-2010, 2009-2011 and 2010-2012 PSA performance cycles, we used Return on Net Capital Employed, or "RONCE,"“ROIC,” for the purpose of assessing our performance in respect offor the PSAs. RONCE, likethree-year performance period ending December 31, 2014. ROIC rewards both earnings and the efficient management of the assets of the company, butcompany. ROIC measures such performance on an after-tax basis, which is more consistent with the way investors evaluate our performance.
The use of RONCE and ROIC align management incentives with our multi-year strategic business plan, including achieving a return greater than our cost of capital, providing an incentive for the efficient utilization of our net assets and motivating employees to adopt strategies to improve the return that we earn on our capital employed. Starting with the 2009-2011these PSAs we also provided an alternative opportunity to earn shares over the three-year performance cycle based on achieving annual goals and subject to a threshold RONCE/ROIC. If the threshold RONCE/ROIC is not met, any award achieved by meeting annual goals will be reduced by 25%. This approach allows flexibility to incentivize management to achieve financial goals that can be set annually in response to changing economic conditions (whether in a declining or improving economic environment), while maintaining the objective of achieving the strategic three-year goal. The annual goals under the PSAs are the same as those used under the MICP, so we are able to reinforce management's focus on these goals and further emphasize their importance. See below under the heading "2011-2013 PSAs" for further detail on the terms of the PSAs.
For the 2009-2011 performance cycle, our RONCE was 110.5% of target. For purposes of the 2009 PSA performance cycle, RONCE was defined as the average return for 2009, 20102012, 2013 and 20112014 divided by the average invested capital employed as of December 31, 2008, 2009, 20102011, 2012, 2013 and 2011,2014, where:
“Return” generally means operating income, adjusted for other operating expense (income), taxes and including equity in earnings from affiliated companies, and
“Invested capital” generally means stockholderstockholders’ equity plus net debt.
Because
In January 2015, the RONCE thresholdcompensation committee certified that for the 2012-2014 performance cycle we achieved ROIC of 15.2%, which was just below the maximum performance level was achievedof 15.6% and resulted in an award of 192.4% of target, as shown in the sumgraph below. This result demonstrates that our performance continued to be strong in the long-term as well as in the short-term, as our investments generated a return that greatly exceeded our cost of capital, while we continued to make substantial investments in capacity to support customer demand.
We pay incentive compensation only after the committee has certified our performance results and corresponding MICP and PSA awards for the performance period. In certifying the results, the committee first performs a review of our financial performance against goals following verification of the shares earned based on achievement of the annual performance goals under the MICP was greater than the number of shares earned based on the achievement of the three-year RONCE target, the number of shares paid out under the PSAs was equal to the sum of the shares earned based on the level of achievement against the annual performance goals, which was 153.1%, 200% and 177.5% for 2009, 2010 and 2011, respectively, resulting in an aggregate award of 177% of target. By providing flexibility to issue award shares based on the higher of alternative measures, we believe thatcalculations by our leaders' compensation reflected our outstanding performance from 2009 to 2011.independent auditors.
The Process for Setting Compensation
Compensation Philosophy
The company’s compensation philosophy, as determined by the compensation committee, is:
To attract, retain and motivate a high caliber of executive talent
To ensure that a significant portion of total target compensation is variable compensation based on company performance
To encourage long-term focus while recognizing the importance of short-term performance
To determine compensation based on forward-looking considerations and not solely on the basis of past compensation or results
To align executive and stockholder interests by requiring NEOs to meet ownership guidelines and prohibiting them from hedging our stock
To establish goals for performance-based compensation that are challenging yet attainable
To discourage excessive risk taking by structuring our pay to consist of a blend of both fixed and variable elements, using an appropriate mix of short and long-term company performance metrics, and setting maximum total payouts
To prevent and remedy executive misconduct, and impose appropriate discipline on individuals who engage in misconduct. See page 37 for a description of our policy regarding executive misconduct,
which authorizes recoupment of incentive compensation from an executive whose misconduct results in the inaccurate reporting of financial results. |
The process used by the company to implement this philosophy is described below.
The Compensation Committee
The compensation committee of the board of directors operates under a written charter approved by the board and reviewed by the committee annually. The charter provides that the committee is accountable for overseeing, reviewing, and approving our compensation and benefit plans and programs and for defining the goals of our compensation policy.policy, reviewing and approving our compensation programs, and overseeing our benefit programs. The committee reviews and approves the compensation of the NEOs on an annual basis, including salary, cash incentives, equity grants and equity grants.benefits. The committee'scommittee’s approval of the compensation of our CEO is subject to ratification by our independent directors. The
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committee also reviews annually the benefit plans applicable to all of our employees, including the NEOs. In addition, the committee periodically reviews our retirement benefits for NEOs.
Compensation Consultant
The committee retains an independent compensation consultant, Semler Brossy Consulting Group, LLC ("(“Semler Brossy"Brossy” or "the consultant"“the consultant”), to assist it in establishing and reviewing executive compensation. The consultant reports directly to the compensation committee and the committee has the sole authority to approve the consultant'sconsultant’s fees and the other terms of engagement. In accordance with NYSE listing standards, the committee assessed the independence of Semler Brossy and determined that it was independent and that its work for the committee has not raised any conflict of interest. Specifically, the consultant has not performed, and does not currently perform, consulting work for management outside the scope of the engagement by the committee. If management requests additional work, the consultant must first obtain the approval of the chair of the committee.
The committee instructshas engaged the consultant to provide advice to the committee with the objective of creating long-term value for stockholders through our compensation programs. In providing this advice, the committee asks the consultant to periodically inform the committee of compensation-related developments that may influence the committee'scommittee’s decision-making processes.processes, including changes to regulations. The consultant is expected to communicate regularly with management to understand the company'scompany’s business environment, talent needs, and compensation considerations (from the perspective of both the committee and management). In addition, prior to committee meetings, the consultant confers with the committee chair regarding the matters to be discussed at the meeting, and confers with management on management presentations to the committee. In the event the consultant disagreesmay differ with management after conferring, the consultant will review any differences independently with the appropriateness of a proposal ofcommittee, or together with management the consultant informs the committee and reviews the areas of disagreement. The consultant has not performed, and does not currently perform, work for management outside the scope of the engagement by the committee. If management requests additional work, the consultant must first obtain the approval of the chair of the committee.
With the recommendation and consent of the committee, our CEO confers with the consultant when developing compensation recommendations for the other NEOs. On behalf of the committee, senior management periodically confers with the consultant on our executive compensation programs and may request the consultant'sconsultant’s views regarding modifying or adopting new programs or preparing offers of employment to senior executives.
Compensation Risk Oversight
We reviewIn December 2014, the committee conducted its annual risk assessment of our compensation policies and practices and evaluated whether our incentive compensation programs to ensure theywould encourage undue risk-taking. The committee considered risk-mitigation features, such as maximum award levels, the use of multiple financial measures, multi-year vesting and stock retention requirements, and a clawback policy. As a result of its review, the committee concluded that we have incentive compensation programs that align pay and performance but do not encouragedrive excessive risk taking.financial risk-taking. We believe that the following features ensure thatrisks arising from our compensation motivatespolicies and practices are not reasonably likely to have a material adverse effect on our employees without creating an environment that encourages excessive risk taking:company.
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BenchmarkingCompetitive Assessment
Each year the committee specifically reviews performance and authorizes the salaries, incentives, and equity grants for the NEOs. In making these determinations, the committee considers prevailing compensation practices of the comparator group as well as general industry survey data.data, experience, tenure in position and other factors it deems relevant.
The Comparator Group
The comparator group is comprised of companies which have attributes that, when viewed as a whole, represent a reasonable comparison to us in a number of relevant respects. In particular, the following criteria are considered in selecting our comparator group:
Industry, such as aerospace, defense and specialty chemicals
Business complexity and international scope and operations
Market for investor capital
Company characteristics such as revenues, number of employees, market capitalization and geographic location
Competition for executive and managerial talent
The comparator group is selected by the committee based on recommendations by our consultant with input from management. The companies included in the comparator group are reviewed annually, and periodically we conduct a detailed assessment of their continued relevance to the company. After review, the committee decided to retain the 2013 comparator group for 2014, as it continued to meet the criteria above in all relevant respects.
The comparator group companies considered by the committee in determining NEO compensation for 20112014 were:
AAR Corp. | H.B. Fuller Company | |||
Albemarle Corporation | Kaman Corporation | |||
Barnes Group Inc. | Cytec Industries Inc. | |||
BE Aerospace, Inc. | Esterline Technologies | |||
Cabot Corporation | FMC Corporation | Teledyne Technologies Inc. | ||
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General Industry Survey Data
In addition to comparator group data, the committee also reviewed the Towers PerrinWatson General Industry Executive Database ("(“Towers Perrin"Watson”), a large compensation survey of hundreds of companies in various industries, including aerospace, chemicals, automotive and defense. Neither the committee nor the company has any input into the scope of the companies included in the survey. Due to the broad scopebreadth of the survey, we size adjust the data based on our revenue for purpose of comparison. While we primarily userely upon the comparator group data, to benchmark, the committee uses the Towers PerrinWatson data as a secondary reference to ensure that the company'scompany’s compensation practices are similar to those in a broader industry index of companies.
Use of Company Performance in our Compensation Programs
We provide the opportunity for both cash and stock incentives based on achievement of individual and company performance measures. Annual cashgoals. Cash awards are available under the MICP. PSAs are earned over a three-year performance period and are granted under our 2003 Incentive Stock Plan ("ISP"), our general long-term incentive plan that provides for the granting of various stock-based awards. Our compensation committee considers and grants MICP and stock-based awards on an annual basis. The committee, in consultation withWith input
from management and the consultant, and senior management, adopts PSAfollowing management’s presentation to the board of a five-year strategic review and current year business plan, the committee selects performance measures for earning awardsand goals and determines the relationship between the achievement of performance and the size of the award payable at threshold, target and maximum levels of performance.performance levels. The committee selects performanceselected measures and goals with input from management and in consultation with the board. These measures are intended to incentincentivize high levels of achievement consistent with our overall business objectives for the performance period.
Use of Individual Performance in our Compensation Programs
CEO
Each year we establishthe committee establishes individual performance objectives for the CEO for the year, and we evaluateevaluates the CEO'sCEO’s performance against the objectives for the preceding year. We base the CEO'sThe CEO’s MICP award opportunity is based solely on company performance. However, we considerthe committee considers achievement of his individual objectives in deciding whether to exercise negative discretion to reduce his MICP award and in setting his target compensation for the subsequent year. At least twice annually, the full board of directors reviews the CEO'sCEO’s performance, and the presidinglead director then discusses the board'sboard’s assessment with the CEO. This assessment includes a review of overall performance of the company, the degree to which strategic objectives wereare being met, leadership accomplishments, and other factors deemed relevant to the CEO'sCEO’s performance. The consultant assists the committee in evaluating competitive CEO compensation data and potential compensation actions that could be taken in light of this performance. Our compensation committee charter requires that all decisions regarding CEO compensation be ratified by our independent directors. The CEO has no role in setting his own compensation. See "NEOs—Direct Compensation and Performance" on page 32 for an explanation regarding the factors that the committee considered in determining the 2011 compensation for Mr. Berges.
Each year the board assesses the CEO's performance and affirmatively considers whether to extend the term of his employment. In 2011, the board determined that the CEO's employment agreement should be extended until at least its current expiration date in, July 2013. See "Employment Agreement with Mr. Berges" on page 41 for a description of Mr. Berges employment agreement.
Other NEOs
Each year, the CEO establishes individual performance objectives for the other NEOs and evaluates their performance against the objectives for the preceding year with additional input from the committee.board. MICP award opportunities for the other NEOs are based solely on company performance, subject to the committee'scommittee’s authority to exercise negative discretion to reduce an NEO'sNEO’s MICP award.
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The committee receives the CEO'sCEO’s assessment of each NEO'sNEO’s overall performance, criticality to business strategy, career potential, and retention risk. For each NEO, the CEO makes recommendations regarding the MICP award and compensation for the next year. These recommendations are reviewed bywith the consultant, who advises the committee on the reasonableness of the recommendations relative to competitive norms. While the committee gives appropriate weight to competitive data and the CEO'sCEO’s recommendations, the committee also exercises its judgment based on the committee'scommittee’s assessment of the performance of the other NEOs. See "NEOs—Direct Compensation and Performance" on page 32 for an explanation regarding the factors that the committee considered in determining the 2011 compensation for each NEO.
Committee'sCommittee’s Use of Tally Sheets
As part of the committee'scommittee’s review of the annual target compensation of the NEOs, the committee reviews "tally sheets"“tally sheets” for each of the NEOs which reflect base salaries, annual bonuses and equity awards plus other forms of compensation such as employer contributions to our qualified and non-qualified deferred compensation retirement benefits, severance paymentsplans, health insurance, and perquisites under various scenarios. The tally sheets also reflect realized and unrealized amounts from awards of equity incentives. Though the compensation previously earned by the NEOs is not a determinant in setting compensation for subsequent years, the committee does utilize the tally sheet data to understand the impact that compensation actions could have on future payments in retirement, termination, and change in control scenarios.perquisites. With the assistance of the committee's consultant, the committee also uses the tally sheets to provide assurance that our compensation programs and payments upon termination under various scenarios are reasonable and in line with industry practices. In addition to the tally sheets, the committee reviews various termination scenarios for our NEOs.
Components of2014 Executive Compensation for 2011
Decisions
In establishing appropriate compensation opportunities for NEOs, the committee considers a variety of factors, such as, but not limited to, depth of experience, tenure in position, past performance, internal equity, retention risks, and market data. We benchmarkconsider total compensation as well as each component of total compensation against the comparator group. See "Benchmarking"“The Process for Setting Compensation—Competitive Assessment” on page 26pages 27-28 of this proxy statement. PayCurrently, target compensation for the current NEOs is targetedeach NEO other than
our Chief Executive Officer falls between the median and 75th75th percentile of the comparator group. This positioning reflectsgroup, reflecting the experience of several of our NEOs as well as their sustained good performance. ActualThe committee set Mr. Stanage’s initial target compensation upon his promotion to CEO below the median of his peers in the comparator group, consistent with its past practice of increasing the total target compensation for each individual NEO falls within the targeted range after adjusting for company size, except for the General Counselof a senior executive officer who is positioned slightly abovenew to a position in increments over an initial period following attainment of the 75th percentile due to his long tenure with the company and demonstrated value to us.
Applying these factors, the committee determined that 20112014 executive compensation would consist of four primary components—salary, short-term cash incentive, long-term equity awardsincentives and a benefits package. The following chart shows each NEO'sNEO’s salary, target cash incentive under the MICP, and target equity awards in 2011,2014, in each case as a percentage of the NEO's salary.NEO’s salary, and the increase in the target component over the prior year. For purposes of calculating the percentages in the chart, the value of each equity award is determined in the same manner used to determine the values appearing in the last column of the Grants of Plan-Based Awards in 2014 table on page 41.42.
NEO | Salary | Target MICP Award as Percentage of Salary | Target Equity Awards as Percentage of Salary | Salary | % Increase from 2013 | Target MICP Award as Percentage of Salary | Increase in Target Percentage from 2013 | Grant Date Fair Value Equity Awards as Percentage of Salary | Increase in Target Percentage from 2013 | |||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
David E. Berges | $ | 950,000 | 100 | % | 250 | % | ||||||||||||||||||||||||||||
Nick L. Stanage | $ | 545,700 | 75 | % | 160 | % | $ | 775,000 | 0% | 100% | 0% | 220% | 20% | |||||||||||||||||||||
Wayne C. Pensky | $ | 390,958 | 65 | % | 165 | % | $ | 465,595 | 5.0% | 75% | 5% | 175% | 5% | |||||||||||||||||||||
Ira J. Krakower | $ | 359,890 | 65 | % | 140 | % | $ | 393,262 | 3.0% | 70% | 0% | 145% | 0% | |||||||||||||||||||||
Robert G. Hennemuth | $ | 337,958 | 55 | % | 130 | % | $ | 371,270 | 3.25% | 60% | 5% | 135% | 0% | |||||||||||||||||||||
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TableThe committee considered the following factors, among others, in determining the initial 2014 compensation of Contentseach of our NEOs:
SalaryNick L. Stanage
In accordance: Upon his promotion to Chief Executive Officer in August 2013, Mr. Stanage received a substantial increase to his salary and target MICP award, with the methodology described above,understanding that he would not be eligible for further increases in salary or MICP until the committee had an opportunity to assess his performance over the course of an entire year. He was also given an increase to his equity compensation, effective for the grants made in 2014. Mr. Berges'Stanage successfully transitioned into the role of CEO and led our continued growth through new product introductions, increased operational efficiency and successful management of our capital expansion programs. He oversaw efforts to increase our organizational capability to support growth through human capital acquisitions, increased customer engagement and the continuous improvement of our operational processes in the areas of safety, quality and on-time delivery. Mr. Stanage continued to lead efforts to further align the company’s technology development efforts with customer needs, resulting in long-term agreements with key customers for new products on new aerospace programs. In addition, Mr. Stanage oversaw the further development of the company’s strategic planning, business development and succession planning processes.
Wayne C. Pensky: The committee increased Mr. Pensky’s salary and his target MICP award and target equity awards as a percentage of his salary to recognize his important leadership contributions during the transition of Mr. Stanage into the CEO role. Mr. Pensky successfully implemented borrowing (including refinancing outstanding debt), cash management and tax strategies that resulted in substantially decreased interest expense and provided significant tax savings and benefits, directed our financial reporting efforts as the company met its internal and external reporting deadlines without experiencing any significant deficiencies with respect to internal controls, led efforts to improve management of our capital structure through share repurchases, and managed the finance function to change with the organization and managed costs and operating performance to help achieve record profitability.
Ira J. Krakower: Mr. Krakower’s compensation reflected his effective management of the legal and export functions, the negotiation of agreements for protection of the company’s intellectual property, establishment of litigation strategies, guidance to the board and management on matters of governance, as well as his oversight of the adoption and implementation of the company’s compliance policies pertaining to ethical conduct of business, and experienced counsel on mergers and acquisitions and global tax strategies.
Robert G. Hennemuth: In 2014, Mr. Hennemuth’s target MICP award as a percentage of his salary was increased from $923,113 in 2010 to $950,000 in 2011, an increasereflect his increased responsibilities as a member of 2.91%. In January 2011,the company’s executive committee. Mr. Berges presentedHennemuth’s overall compensation for 2014 was based on his leadership of the company’s executive and leadership development and succession planning activities, development and introduction of organizational capability to improve change management, recruitment and retention strategies, diversity outreach, new global human resource software platforms, refined functional organizational structures to improve decision-making and career development, enhancement of new employee communications strategies, and ongoing support to the board’s compensation committee his recommendations regarding salary increases for our other NEOs. Based on Mr. Berges' assessment of their performancematters related to executive and other factors the committee deemed relevant, salary increases for the other NEOs were approved as follows: Mr. Stanage, 2.0%; Mr. Pensky, 4.0%; Mr. Krakower, 3.0%; and Mr. Hennemuth, 3.4%.director compensation.
MICP Awards
The MICP is a stockholder-approved plan that provides an annual cash incentive opportunity to select key employees including the NEOs. The cash incentive awards paid for 20112014 appear in the Summary Compensation Table under the "Non-Equity“Non-Equity Incentive Plan Compensation"Compensation” column. Under the plan, competitively-based cash incentive target amounts, expressed as a percentage of salary, are established for participants at the beginning of each year by the committee.
In December 2013, the committee established the 2014 performance measures described below for all participants in the MICP including our NEOs (there were 134 participants overall). The maximum award for each performance measure was 200% of the target award for that measure. The maximum consolidated award was 200% of the weighted average of the awards determined for each performance measure. Nothing is paid in respect of a performance measure if the threshold level for that measure is not attained. Cash incentive awards paid to NEOs for 20112014 were determined exclusively based on the degree of attainment of these predetermined objective financial performance measures.
For 2014, performance was measured against three metrics: Adjusted EBIT, Cash from Operating Activities and Adjusted Diluted Earnings per Share, with each component given equal weight. This approach is consistent with our MICP approach in 2013, as the committee continues to believe that this mix effectively aligns short-term incentives for plan participants with key financial measures as explained on page 21 under "Pay for Performance." that are critical to the company’s long-term success.
The MICP provides for the grant of "qualified“qualified awards,"” which are intended to qualify as performance-based compensation for purposes of Section 162(m) of the Internal Revenue Code (the "Code"“Code”), and for the grant of "non-qualified"“non-qualified” awards, which are not intended to qualify as "performance“performance based compensation"compensation” under Section 162(m). See below under the heading "The“The Impact of Tax Regulations on our Executive Compensation—Deductibility of Compensation—Section 162(m)"” for details on the impact of Section 162(m). At the end of the performance period, the committee has discretion to adjust a qualified award downward, but not upward, from the objectively determined level of attainment of the performance measure. Non-qualified awards can be adjusted upward or downward. In 2011,2014, the committee did not exercise negative discretion in making MCIP awards. The NEOs received only qualified awards in 2011.2014.
After review, the committee did not increase the target MICP award (expressed as percentage of salary) of any NEO from 2010 to 2011.
Equity Awards
We make annual awards of equity incentives to NEOs pursuant to the ISP. On occasion we make unique individual awards to NEOs when special recognition is warranted, although no special awards were granted in 2011. In 2011, we used three forms of equity incentives granted to the NEOs under the ISP: NQOs, RSUs and PSAs. In its meeting in January 2011, the committee approved the dollar value of each NEO's aggregate equity award for 2011 as a percentage of the NEO's salary for 2011, and approved the forms in which the awards would be granted: 50% of total grant date award value in NQOs, and 25% of total grant date award value in each of RSUs and PSAs. The committee reviewed a variety of factors to determine if our long-term incentive percentages for our NEOs were competitive with those of our peers and appropriate in light of our compensation philosophies. The mix of types of awards was intended to provide our most senior executives with performance-based incentives for delivering results in a challenging business environment.
These equityEquity incentives foster the long-term perspective necessary for continued success in our business. They also align the interests of our NEOs with stockholder value and are an important element of our goal to be competitive with peer companies.
Valuation
We make annual awards of equity incentives to NEOs. Equity awards prior to May 2013 were made under our 2003 Incentive Stock Plan (the “2003 ISP”). In May 2013, our stockholders adopted the 2013 Incentive Stock Plan (the “2013 ISP”), which supersedes the 2003 ISP and governs all awards made after May 2013. On January 31, 2011 (the grant date for suchoccasion we make unique individual awards as determined in accordance with our equity award policy), the dollar values were converted into a number of NQOs, RSUs and PSAs based on the
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valuation methodology used by us to determine accounting expense for the fair value of the awards under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 718. The RSUs and PSAs were valued, for each share they represented, at the closing price of our common stock on the NYSE on January 31, 2011 ($19.02). The value of PSAs was not discounted to reflect the degree of difficulty of attaining the applicable performance goals. The NQOs awarded to NEOs were valued at $7.65 for each share based on a Black-Scholes value determined as 40.2% of the closing price of a share.
Equity Award Policy
when special recognition is warranted. Under our equity award policy:
Equity awards may only be authorized by the board, the compensation committee, or by an equity grant committee specifically authorized by the board or the compensation committee
The compensation committee has the discretion to authorize grants outside the policy when circumstances warrant
The per share exercise price of a stock option shall not be less than the closing price of a share of our common stock on the NYSE on the date of grant
We choose to value equity grants and to set the exercise price of an NQO on the third trading day after we next release earnings following a grant authorization to allow the public market an opportunity to digest our most recent financial results and establish the fair market value of a share of our common stock on the date of grant.
In January 2014, we used three forms of equity incentives granted to the NEOs under the 2013 ISP: NQOs, RSUs and PSAs. At its meeting in January 2014, the committee approved the dollar value of each NEO’s aggregate equity award for 2014 as a percentage of the NEO’s salary for 2014, and approved the forms in which the awards would be granted. The committee reviewed a variety of factors to determine if our long-term incentive award mix percentages for our NEOs were competitive with those of our peers and appropriate in light of our compensation philosophies, and, with guidance from the compensation consultant, determined that the mix of types of awards for 2014 would be:
• Mr. Stanage: | 37.5% NQOs; 62.5% PSAs | |
• Messrs. Pensky, Krakower and Hennemuth: | 37.5% NQOs; 25% RSUs; 37.5% PSAs | |
This is consistent with the mix of awards granted in 2013. The committee continues to believe that it is important that more of the long-term awards be made in the form of performance-based awards tied to specific company performance measures, to more closely align the interests of our NEOs with those of our stockholders and to bring our compensation practices in line with the market trends towards greater emphasis on performance-based equity compensation. In addition, the committee amended our award agreements to provide for the award of dividend equivalents on RSU and PSA awards. Dividend equivalents accrue on the shares underlying the award, but are not paid unless and only to the extent that the underlying awards vest. The company began paying a quarterly dividend of $.10 per share in the first quarter of fiscal 2015.
Valuation
On January 28, 2014 (the grant
Stock Options
NQOs have an exercise price equal to the closing price of our common stock on the NYSE on the grant date, typically have a term of ten years and vest ratably over three years. Because financial gain from NQOs is only possible if the price of our common stock increases during the term of the NQO, we believe grants encourage NEOs and other employees to focus on behaviors and initiatives that should lead to a longer-term increase in the price of our common stock, which aligns the interests of our NEOs and employees with those of our stockholders.
Restricted Stock Units
RSUs represent units that generally vest and convert into shares of our common stock on a one-to-one basis ratably over three years. Because RSUs are valued at the closing price of common stock on the date of grant, a grant of equity award value in the form of RSUs results in the issuance of fewer shares and less dilution than would result from providing the same value in the form of NQOs. RSUs are also an important vehicle to enhance retention of key employees and to assist newly hired or promoted NEOs to achievemeet their requirements under our stock ownership guidelines.
PerformancePerformance-Based Share Awards
PSAs provide an opportunity to receive a number of shares of our common stock based upon achievement of a measure of our performance over a multi-year period. There is a threshold, target and maximum number of shares that can be earned over the performance period. The maximum number of shares that can be earned is 200% of target. PSA grants encourage NEOs and other employees to focus on improved long-term financial performance and increases in the price of our common stock.
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TableIn 2014, we used Return on Invested Capital, or “ROIC,” to measure our long-term success. ROIC is based on after-tax results which is the way investors evaluate our performance. ROIC incentivizes the efficient use of Contentsassets to improve the return we earn on our investments and provides better alignment with our strategic plan to achieve long-term growth in net earnings.
2011-20132014-2016 PSAs
Our PSA program has a three-year performance period. TheFor the 2014-2016 PSAs, the number of shares awarded at the end of the period is the greater of (i) the shares earned will be based on achievement of ROIC over the three-year ROIC or (ii) the sum of the shares earned based on achievement of separate performance measures for each of the three years in the performance period. However, if the threshold performance level for three-year ROIC is not met, then the amount of any shares earned based on yearly achievement will be reduced by 25%. The yearly performance measures, and the threshold, target and maximum levels of payout, as well as all other terms for determining the annual earned share amounts for each year under the PSA program, are the same as those adopted under the MICP for the corresponding year.period ending December 31, 2016.
For our 2011 PSA program, ROIC is defined as the average return for 2011, 20122014, 2015 and 20132016 divided by the average invested capital as of December 31, 2010, 2011, 20122013, 2014, 2015 and 2013,2016, where:
“Return” generally means operating income, adjusted for other operating expense (income), taxes and including equity in earnings from affiliated companies, and
“Invested capital"capital” generally means stockholderstockholders’ equity plus totalnet debt.
The following chart indicates the awards payable for 2011-2013,2014-2016, as a percentage of target awards, at various levels of attained ROIC:
2011 - 20132014-2016 PSAPayout Schedule
The structure of the 2011-2013 PSAs requires a threshold level of performance before any payout is earned. As the chart shows, depending on achievement there are threshold (50% of target award), target (100% target award) and maximum (200% of target award) award levels.
As indicated previously in this proxy statement, the payout under our MICP for 2011 was 177.5% of the target MICP award; therefore, the shares that have been provisionally earned so far for each participant under the 2011-2013 PSA program—based on our performance in the year 2011—is equal to 59.2% of the three-year target amount of shares. This result is obtained by taking one-third of the three-year target award under the PSA program and multiplying it by 177.5%. However, the final 2011-2013 PSA award will not be determined until the end of the performance period. If we fail to meet the threshold level for the three-year ROIC achievement, then the total of the provisionally
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earned shares based on annual achievements for 2011-2013 will decrease by 25%. In no event can the award of PSA shares exceed 200% of target award.
Under the PSAs, upon termination of employment due to death, disability or retirement, or upon termination of the employee without cause or, in the case of our NEOs, by the executive for good reason, the employee is entitled to receive a pro-rata portion, based on time employed during the performance period, of the earned award.
The committee adopted ROIC as the performance measure for the 2011-2013 PSAs for various reasons including:
ROIC target levels were established by the committee in late 20102013 based on the businessstrategic plan for 2011-2013.2014-2016. The targetcommittee also took into account the fact that the company had consistently achieved ROIC in excess of its industry peers. Target levels chosen were challenging, yet attainable, giving consideration to:
Our planned capital investments in new manufacturing plants and capacity during the period
Our objective of achieving an adequatea return on capital
The probability of inventory levels
NEOs—Direct Compensation and Performance
The committee considered the following factors, among others,a change in determining the 2011 compensation of each of our NEOs:
David E. Berges, Chairman and Chief Executive Officer
Mr. Berges' leadershipsales in the developmentevent of our long-term business strategies for the company, including penetration intoincreases or decreases to forecasted aircraft build rates or delays or accelerations in new aircraft programs building relationships with important customers and suppliers, adherence to good governance practices, and successful management of investor relations. Under his guidance, the company's financial performance in 2011 was significantly improved over 2010 which led to improved earnings, further debt de-leveraging, reduced interest expense, and a solid platform for the capital expenditures to support expansions to meet growing customer demand. Mr. Berges continued to lead the company's organizational development and was instrumental in successfully integrating new key senior executives.
Nick L. Stanage, President
Mr. Stanage's significant role in guiding the growth of our operations, including management of growth initiatives for products on new aircraft and engines, the successful introduction of new products, his development and implementation of strategy and his role in developing and implementing a new customer-facing matrix organization, including the integration of new key personnel to support the new organization. In addition, Mr. Stanage oversaw the continued improvement of process innovation through improved production, sales, inventory and operations planning, as well as overseeing the company's significant capital projects.
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Wayne C. Pensky, Senior Vice President and Chief Financial Officer
Mr. Pensky's successful implementation of borrowing, cash management and tax strategies that resulted in substantially decreased interest expense and provided significant tax savings and benefits, his leadership of our financial reporting efforts as the company met or accelerated its internal and external reporting deadlines, without experiencing any significant deficiencies with respect to internal controls, and Mr. Pensky's management in the outsourcing of the internal audit function, which helped improve visibility of internal audit and the speed and quality with which the reviews were completed.
Ira J. Krakower, Senior Vice President, General Counsel, and Secretary
Mr. Krakower's effective management of the legal, environmental and export functions that report into his position, the successful defense and settlement of several litigation matters, the negotiation of agreements for protection of the company's intellectual property, and guidance to the board and management on matters of governance, as well as overseeing the adoption and implementation of the company's compliance policies pertaining to ethical conduct of business.
Robert G. Hennemuth, Senior Vice President of Human Resources
Mr. Hennemuth's effective development and deploymentThe probability of a revised organizational structure and improved succession planning and diversity at multiple organizationalchange in levels successful recruitment and integration of new senior leaders, the development of new leadership development activities, including the company's first early career rotational program, and leadership of efforts to strengthen the company's overall recruitment capability and processes.defense spending
Our employees are offered participation in a variety of retirement, health and welfare, and paid time-off benefit plans which promote employee well-being and retention. Our NEOs may participate in these plans to the same extent as our other employees. These plans may be subject to tax and regulatory restrictions that may limit benefits payable under the plan or impose adverse consequences if benefits are paid based on compensation above certain levels. These plans play an important role in keeping us competitive in attracting and retaining officers.
Qualified 401(k) Plan
Our qualified 401(k) Plan allows substantially all US employees to contribute up to 75% percent of their cash compensation. The plan further provides:
that employee contributions and earnings thereon are 100% vested at all times
for a 50% company match on employee contributions, up to a maximum of 6% of total cash compensation
for a discretionary profit sharing contribution into the plan annually as determined by the compensation committee
for a fixed contribution of an additional 2% of each employee'semployee’s cash compensation each year, or 4% for employees who were 45 years of age on or before December 31, 2000 and employed by us as of such date
for all matching, discretionary and fixed contributions and earnings to vest at the rate of 20% for each year of service with us—meaning that all contributions are fully vested after five years
One of the investment options in the 401(k) plan is a Hexcel stock fund. Senior executives, including all the NEOs, are not permitted to invest in this fund. Other employees may only invest company contributions, and not their own contributions and earnings, in the Hexcel stock fund.
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Amounts contributed by the company to the 401(k) Plan on behalf of the NEOs are included in “All Other Compensation” in the Summary Compensation Table on page 40.
Nonqualified Deferred Compensation Plan
TableOur NEOs are eligible to participate in the nonqualified deferred compensation plan (“NDCP”). The NDCP is an unfunded plan that permits a select number of Contentshighly compensated employees to defer a percentage of their pay and receive Hexcel matching and profit sharing contributions above the IRS limits permitted under our qualified 401(k) plan. Terms of the plan are as follows:
participants can defer any amount of their cash compensation (salary and cash incentive award) on a pre-tax basis
all of our matching contributions are made on the same 50% basis as described above with respect to the qualified 401(k) plan, but only with respect to the participant’s deferrals under the NDCP up to 6% of their compensation in excess of the compensation taken into account for purposes of determining contributions to the qualified 401(k) plan
all of our other contributions—discretionary profit-sharing, and fixed weekly contributions—are made on the same basis as described above with respect to the qualified 401(k) plan, but only with respect to the amount of the participant’s compensation in excess of the amount used for purposes of determining contributions to the qualified 401(k) plan
employee and company contributions are 100% vested at all times
the investment options generally mirror those available in our qualified 401(k) plan, except that the Hexcel stock fund is not an option
distributions are in a lump sum or in a series of monthly, quarterly or annual installments after termination of service, as elected by the employee
in-service distributions are generally prohibited except in the case of an unforeseeable emergency
loans from the NDCP are prohibited.
See “Nonqualified Deferred Compensation in Fiscal Year 2014” on page 48 for details on our NEO’s participation in the NDCP.
Supplemental Benefits
Our NEOs receive the following supplemental benefits:
We have entered into the following supplemental retirement agreements with our NEOs, which are described on page 44pages 45-47 under "Pension“Pension Benefits in Fiscal 2011"Year 2014”:
supplemental executive retirement agreements ("SERPs"(“SERPs”) with Messrs. Berges, Stanage and Krakower
executive deferred compensation arrangements ("EDCAs"(“EDCAs”) with Messrs. Pensky and Hennemuth
The committee periodically reviews these supplemental retirement benefits and would specifically review the competitive aspect of this type of benefit upon a future NEO hire.
For Mr. Bergeseach of our NEOs, we provide a death benefit while he is employed by us equal to two times the sum of (i) his salary on the date of death and (ii) the average of the MICP awards in the two years prior to death, up to a maximum of $1,500,000. For Messrs. Stanage, Pensky, Krakower and Hennemuth, we provide a death benefit for each of them so long as they continue to be employed by us equal to two times the sum of (i) salary on the date of death and (ii) the average of the MICP awards paid in the three years prior to death, up to a maximum of $1,500,000 for Mr. Stanage.
Neither Mr. Berges norWe provide only limited perquisites to our NEOs, and Mr. Stanage participatesdoes not participate in our annual perquisites program. For each of Messrs. Pensky, Krakower and Hennemuth, our perquisites program is designed to provide specific benefits that will enhance retention. The committee reviews our perquisites program annually. Our perquisites program provides for an annual car allowance of $12,000, and an additional annual allowance of up to $10,600 (for Messrs. Pensky and Krakower), and $5,600 (for Mr. Hennemuth)., which is only paid if actually used. These amounts have not increased since 2000. The additional allowance may be used for:
reimbursement of club membership dues
expenses incurred for financial counseling and tax preparation
premiums for supplemental life and health insurance beyond the standard life and health insurance available to our executives
Our NEOs are not permitted to use any part of the NEOadditional annual allowance as a reimbursement for taxes due on the income recognized by the NEONEOs as a result of receiving these reimbursements (but only to the extent of any remaining balance)
perquisites. We believe that the perquisites we offer to our NEOs are reasonable in amount and are market competitive. The committee reviews our perquisites program annually.
Under the company's stock ownership guidelines:
34
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The guidelines provide that shares held by a parent, child, or grandchild of the executive or director, or by a trust or other entity established for any such family members, will count toward reaching the guideline dollar value so long as the executive or director retains the power to dispose of the shares. The compensation committee believes that the purpose of aligning the interests of directors and executives with those of stockholders through stock ownership is still served when shares are held by immediate family members or trusts or other entities for their benefit. This also removes a disincentive to transfer shares to family trusts in order to facilitate estate planning.
Under these guidelines, all of our directors and NEOs are in compliance with the policy. We monitor compliance with the guidelines by all NEOs and directors on a quarterly basis.
Employees and directors are not permitted to "sell short" Hexcel stock or to otherwise hedge their economic exposure to the Hexcel stock they own.
Potential Impact on Compensation from Executive Misconduct
If the board or an appropriate committee of the board has determined that an officer has engaged in fraudulent or intentional misconduct, we are authorized to take action to remedy the misconduct, prevent its recurrence, and impose appropriate discipline on the individual who engaged in the misconduct. Discipline would vary depending on the facts and circumstances, and may include:
These remedies are in addition to any other remedies available to us or imposed by law enforcement agencies, regulators or other authorities.
35
In addition to the remedies above, our equity grants to NEOs also include a clawback provision in the event the NEO violates certain obligations to the company, including confidentiality, non-competition and non-solicitation of employees.
The Impact of Tax Regulations on our Executive Compensation
Deductibility of Compensation—Section 162(m)
Under Section 162(m) of the Code there is a $1.0 million annual limit on the deductibility of compensation paid to certain NEOs, subject to limited exceptions. One exception applies to compensation that meets all of the requirements of "qualified performance-based compensation" under Section 162(m) and the applicable regulations thereunder and compensation that meets all of these requirements will be fully deductible to the company. We consider deductibility as one factor along with others that are relevant in setting compensation. NQOs and PSAs issued under the ISP generally qualify for deductibility as performance-based compensation. As noted on page 30, we also grant RSUs without any performance requirement as one of the mechanisms we employ to foster retention of key employees. The MICP provides for the grant of both awards that are intended to qualify as performance-based compensation and awards that are not intended to qualify as performance-based compensation. We generally structure annual awards under the MIPC to qualify as performance-based compensation under Section 162(m) so that such awards are fully deductible to the company.
We were able to deduct all expense associated with the compensation paid to our NEOs in 2011 except for $1,019,353 associated with compensation to Mr. Berges and $353,735 associated with compensation to Mr. Stanage. For Mr. Berges, the nonperformance-based compensation consisted of salary and the taxable value of shares received from prior grants of RSUs that converted into shares in 2011. For Mr. Stanage, the nonperformance-based compensation consisted of salary and the taxable value of shares received from a prior grant of RSUs that converted into shares in 2011.
Deferred Compensation Rules—Section 409A
Section 409A limits the timing of deferral elections, the range of permissible payment events, and the ability to accelerate payments under nonqualified deferred compensation plans, and imposes certain additional taxes and penalties on participants if the plan fails to comply. It is our intention that our deferred compensation plans and arrangements comply with Section 409A.
Severance and Change in Control Arrangements
As described on pages 49-55 of this proxy statement, we provideWe have provided certain payments, benefits or enhancements to our NEOs as a result of certain terminations of employment or upon a change in control. In addition, as described on pages 50-52, we accelerate vesting of many of our equity grants upon certain terminations or upon a change in control. We also provide a modified gross-up for excise taxes incurred by our NEOs on "excess parachute payments" under 280G of the Code. With respectThese benefits are designed to Mr. Stanage, the modified gross-up applies only with respect to a change in control that occurs on or before November 9, 2014.
These severance and change in control benefits enhance our ability to attract and retain executives as we compete for talented individuals in a competitive marketplace. The principal benefits are the following, which are more fully described on pages 49-55. The committee periodically reviews these benefits and is mindful of market trends and advocacy regarding these benefits.
Severance Benefits Upon Termination of Employment
In providing forWe provide payments and enhancements upon termination of employment of the NEO by us without cause or by the NEO for good reason, other than in connection with a change in control,reason. We believe the compensation committee attempted to provide a level of benefits that is both reasonable and competitive, and took intocompetitive.
36
consideration the likelihood that it will take more time for an executive-level employee to find comparable new employment.
The committee approved the enhanced benefits for our NEOs under their SERP and executive severance agreements following a termination in connection with a change in control in order to motivate executives to consider corporate transactions that are in the best interests of the company and its stockholders without undue concern over the impact of the transaction on the NEO's personal situation.
Single-Trigger Equity Vesting
In adopting a "single-trigger"We utilize “single-trigger” vesting for vesting equity awards—which means the equity awards vest upon a change in control regardless of whether the NEO's employment is terminated—control. In adopting this approach, the compensation committee considered the following:
a single trigger on equity vesting can be an especially powerful retention device for senior executives during change in control discussions, as equity represents a significant portion of total compensation
the desire to provide NEOs with the same opportunity as stockholders have to realize value at the time of a change in control, consistent with the intended alignment of NEO'sNEOs interests to those of stockholders
the fact that the company may no longer exist after a change in control, or performance measures may become misaligned with strategies formulated by new management or a new board
Modified Gross-Up
With respectEach of our current NEOs other than Mr. Stanage is entitled to the modified gross-upreceive a “modified gross-up” for excise taxes incurred on "excess“excess parachute payments," we believe that it servespayments” for any excise tax incurred under Section 280G and Section 4999 of the Code in connection with a change in control.
The modified gross-up provided by the company entitles an eligible NEO to supportreceive a gross-up payment for any excise tax incurred under Section 280G and Section 4999, but only if the general principle of preservingtotal “parachute payments” exceed such NEO’s safe harbor amount (the amount to which the benefits intendedNEO’s change in control payments would need to be deliveredreduced in order to avoid the imposition of the excise tax) by 10% or more. We have agreed to reimburse the NEOs for the excise tax as well as any income tax and excise tax payable by the NEO and removing personal interests from decisionsas a result of any reimbursements for the excise tax. If the NEO’s total “parachute payments” are less than 10% over the safe harbor amount, such NEO’s change in control payments will be reduced by an amount necessary to avoid the imposition of the excise tax.
In connection with the appointment of Mr. Stanage as CEO on August 1, 2013, the committee adopted a new Executive Severance Policy that enhance stockholder value. The effects ofapplies to newly hired or promoted executives. Among other things, the policy does not provide for a gross-up payment for any excise tax incurred under Section 280G are unpredictable and can have widely divergentSection 4999. Mr. Stanage agreed to accept the severance benefits under the policy effective August 1, 2013, with the exception that he retained a gross-up benefit until November 9, 2014, which was the initially established sunset date for gross-up benefits under his original Employment and unexpected effects based on an NEO's personal compensation history. Severance Agreement. Mr. Stanage is no longer entitled to any gross-up benefits. See page 49 for a description of the new Executive Severance Policy and its applicability to Mr. Stanage.
As indicated in the table on page 54, if a change in control and termination of employment occurred on December 30, 2011, Messrs. Stanage and Hennemuth are the only31, 2014, none of our NEOs who would have received a gross-up payment.
See pages 49-51Stock Ownership Guidelines
We believe that when executives own a meaningful amount of equity, it creates better alignment with stockholder interests, so we require all of our NEOs and directors to meet specified ownership guidelines for our common stock. Under the company’s stock ownership guidelines:
the executive or director is required to reach the target dollar value through ownership of shares of unrestricted common stock and to retain those shares until termination of service;
unvested awards do not count as shares owned, only shares received upon conversion or exercise of awards count as shares owned
the target dollar value is as follows:
CEO | 5x Salary | |
NEOs other than CEO | 2x Salary | |
Directors | 5x Annual Cash Retainer Fee* |
| * | In May 2014, the board amended the stock ownership guidelines to increase the target dollar value for non-employee directors from 3x Annual Cash Retainer Fee to 5x Annual Cash Retainer Fee to better align our director requirements with market trends. |
until the target dollar value has been reached, an executive must retain 50%, and a descriptiondirector must retain 100%, of post-termination obligations imposedall “net” shares received under any company equity compensation program
“net” shares means all shares remaining after the sale by the executive or director, or the withholding by us of shares to pay the exercise price (in the case of options), and any taxes due in respect of the shares received
testing for compliance is done on some NEOs.the last day of each fiscal quarter
once the executive or director holds the target dollar value as of a testing date, he is deemed to be in compliance with the policy so long as he continues to hold at least the number of shares he held as of that testing date
The guidelines provide that shares held by a parent, child, or grandchild of the executive or director, or by a trust or other entity established for any such family members, will count toward reaching the guideline dollar value so long as the executive or director retains the power to dispose of the shares. The compensation committee believes that the purpose of aligning the interests of directors and executives with those of stockholders through stock ownership is still served when shares are held by immediate family members or trusts or other entities for their benefit. This also removes a disincentive to transfer shares to family trusts in order to facilitate estate planning.
All of our NEOs are in compliance with the policy. We monitor compliance with the guidelines by all NEOs and directors on a quarterly basis.
Our Insider Trading Policy expressly states that directors, officers and employees are prohibited from engaging in “short sales” or any hedging or monetization transactions, including through the use of financial instruments such as prepaid variable forwards, equity swaps, collars and exchange funds. In addition, the policy strongly discourages pledges of Hexcel securities, and officers and directors must gain pre-clearance to pledge any Hexcel securities they hold. None of our directors or NEOs has pledged any of Hexcel’s stock as security.
Potential Impact on Compensation from Executive Misconduct
If the board or an appropriate committee of the board has determined that an officer has engaged in fraudulent or intentional misconduct, we are authorized to take action to remedy the misconduct, prevent its recurrence, and impose appropriate discipline on the individual who engaged in the misconduct. Discipline would vary depending on the facts and circumstances, and may include:
termination of employment
initiating an action for breach of fiduciary duty
if the misconduct resulted in inaccurate reporting of our financial results, seeking cancellation of that number of outstanding equity awards, and recoupment (net of tax) of that portion of any performance-based or incentive compensation paid or delivered, or of any gains realized from the sale of stock from equity awards, which is greater than would have been awarded, paid or delivered to, or realized by, the officer, if calculated based on the accurate reporting of financial results. The officer will be subject to such cancellation and recoupment within the eighteen month period following the date on which the payment or award based on the inaccurate calculation has been made or delivered, including any portion of such period occurring after the executive’s employment has terminated for any reason.
These remedies are in addition to any other remedies available to us or imposed by law enforcement agencies, regulators or other authorities.
In addition to the remedies above, our equity grants to NEOs also include a clawback provision in the event the NEO violates certain obligations to the company, including confidentiality, non-competition and non-solicitation of employees.
The Impact of Tax Regulations on our Executive Compensation
Deductibility of Compensation—Section 162(m)
Under Section 162(m) of the Code there is a $1.0 million annual limit on the deductibility of compensation paid to certain NEOs, subject to limited exceptions. One exception applies to compensation that meets all of the requirements of “qualified performance-based compensation” under Section 162(m) and the applicable regulations thereunder. Compensation that meets all of these requirements will be fully deductible to the company. We consider deductibility as one factor along with others that are relevant in setting compensation. NQOs and PSAs issued under the 2003 ISP and the 2013 ISP are intended to qualify for deductibility as performance-based compensation. As noted on page 32, we also grant RSUs without any performance requirement as one of the mechanisms we employ to foster retention of key employees; these RSUs do not meet the requirements of qualified performance-based compensation under Section 162(m). The MICP provides for the grant of both awards that are intended to qualify as performance-based compensation and awards that are not intended to qualify as performance-based compensation.
We generally structure annual awards under the MICP with the intent that they qualify as performance-based compensation under Section 162(m) so that such awards are fully deductible to the company; however, changes in tax laws (and interpretations of those laws), as well as other factors beyond the company’s control, also affect the deductibility of executive compensation. In addition, the committee may determine that corporate objectives justify the cost of being unable to deduct annual and long-term incentive compensation. For these and other reasons, the company will not necessarily in all circumstances limit executive compensation to the amount which is permitted to be deductible as an expense of the company under Section 162(m). The committee will consider various alternatives to preserving the deductibility of compensation payments and benefits to the extent reasonably practicable and to the extent consistent with the company’s other compensation objectives.
We were able to deduct substantially all expense associated with the compensation paid to our NEOs in 2014 except for $78,326 associated with compensation paid to Mr. Stanage. The nonperformance-based compensation consisted of salary and the taxable value of shares received from a prior grant of RSUs that converted into shares in 2014.
Compensation Committee Interlocks and Insider Participation
The following directors were members of the compensation committee during 2011:2014: Joel S. Beckman, Sandra L. Derickson, Thomas A. Gendron, Guy C. Hachey (as of October 9, 2014) and David L. Pugh. None of these directors has been a Hexcelan employee or executive officer of Hexcel at any time. In addition, during 2014, no Hexcel executive officer served on the board of directors or compensation committee of another entity during 2011.a company that had an executive officer that served on our board of directors or compensation committee.
The compensation committee has reviewed the Compensation Discussion and Analysis and discussed it with management. Based on its review and discussions with management, the committee recommended to our Board of Directors that the Compensation Discussion and Analysis be included in our 2011this proxy statement and incorporated by reference into our Annual Report on Form 10-K for 2011.the fiscal year ended December 31, 2014. This report is provided by the following independent directors who comprise the committee:committee (Mr. Hachey joined the Committee in October 2014):
David L. Pugh, (Chair)Joel S. BeckmanSandra L. Derickson
Chair
W. Kim Foster
Guy C. Hachey
Thomas A. Gendron
37The Members of the Compensation Committee
Name and Principal Position Nick L. Stanage; President Wayne C. Pensky; SVP and CFO Ira J. Krakower; SVP; General Counsel; and Secretary Robert G. Hennemuth SVP—Human Resources Equity compensation plans approved by security holders Equity compensation plans not approved by security holders Total Nick L. Stanage Wayne C. Pensky Ira J. Krakower Robert G. Hennemuth For each year, represents the difference between the actuarial present value of the executive’s accumulated benefit under his SERP or EDCA, as applicable, as of December 31 of the current year and December 31 of the prior year. Messrs. Stanage and Krakower each have a SERP, and Messrs. Pensky and Hennemuth each have an EDCA. These changes in present value are not directly in relation to finalTable of ContentsEXECUTIVE COMPENSATIONEQUITY COMPENSATION PLAN INFORMATION
Summary Compensation TableThe following information is provided as of December 31, 2011: Year Salary
($) Stock
Awards
($)(1)(2) Option
Awards
($)(2)(3) Non-Equity
Incentive
Plan
Compensation
($)(4) Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($)(5) All Other
Compensation
($)(6) Total
($) 2014 775,000 1,065,616 639,588 1,067,175 1,161,744 110,470 4,819,593 2013 690,188 787,857 472,712 871,164 411,764 63,863 3,297,548 2012 572,985 487,034 487,039 530,298 551,880 95,617 2,724,852 2014 465,595 509,238 305,651 480,843 352,527 108,593 2,222,448 2013 443,424 471,120 282,682 425,554 129,334 110,730 1,862,844 2012 414,415 341,910 341,896 332,402 426,367 92,575 1,949,565 2014 393,262 356,424 213,904 379,065 304,217 104,683 1,751,555 2013 381,808 572,185 207,613 366,421 0 105,003 1,633,030 2012 370,687 259,461 259,481 297,328 366,927 89,654 1,643,538 2014 371,270 313,242 188,018 306,743 184,059 74,115 1,437,447 2013 359,584 303,394 182,045 271,144 166,393 69,581 1,352,141 2012 348,097 226,271 226,260 236,253 276,814 62,123 1,375,819 Plan Category Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights(1) Weighted-average exercise
price of outstanding
options, warrants and rights Number of securities
remaining available for
future issuance under equity
compensation plans
(excluding securities
reflected in column(a))(1) (a) (b) (c) 6,135,278 (2) $ 12.02 (3) 2,563,588 (4) 27,988 (5) N/A (6) 0 6,136,266 $ 12.02 (3) 2,563,588 (4) (1)All numbers in these columns refer to shares of Hexcel common stock.(2)Includes 4,085,524 shares issuable upon the exercise of NQOs, 797,760 shares issuable upon the vesting and conversion of RSUs, and 1,251,994 shares issuable as a result of outstanding PSAs. With respect to PSAs for the 2009-2011 performance period, reflects 501,742 shares to be issued, based on the level of attainment of RONCE (the applicable performance measure) during the 2009-2011 period. With respect to the 2010-2012 and 2011-2013 periods, assumes that we will attain the maximum level of RONCE and ROIC, respectively, under the PSAs for each performance period, which would result in the PSAs converting into the maximum number of RSUs in early 2013 and 2014, respectively.(3)Excludes the RSUs and PSAs referred to in note 2 above because they have no exercise price.(4)Includes (i) 2,235,494 shares of common stock available for future issuance under the ISP, which shares of common stock could be issued in connection with awards other than options, warrants or rights, (ii) 174,045 shares of common stock subject to options as of December 31, 2011 under, and purchased in January 2012 pursuant to, the terms of the Hexcel Corporation 2009 Employee Stock Purchase Plan or that could after December 31, 2011 become subject to options under, and therefore be purchased under, the terms of the Hexcel Corporation 2009 Employee Stock Purchase Plan.(5)The only equity compensation arrangement in which options, warrants or rights were authorized that have not been approved by stockholders is an RSU award to Mr. Stanage granted in connection with his employment agreement, as described under the heading "Employment and Severance Agreement with Mr. Stanage" on page 42.(6)The only applicable arrangement consists of RSUs which have no exercise price.(1) Reflects the aggregate grant date fair value of RSUs and PSAs granted to the NEO during such year, computed in accordance with FASB ASC Topic 718. These amounts do not correspond to the actual value that will be realized by the NEO. The amount included for each PSA reflects the estimate of aggregate compensation cost to be recognized over the life of the PSA determined as of the grant date under FASB ASC Topic 718, excluding the effect of estimated forfeitures and assuming that the PSA will pay out at target. The value for each PSA at the grant date assuming that the target level of performance will be achieved and alternatively, that the highest level of performance will be achieved, is as follows: 38 2014 2013 2012 Amount included
in Stock Awards
above (target) Maximum
amount Amount included
in Stock Awards
above (target) Maximum
amount Amount included
in Stock Awards
above (target) Maximum
amount 1,065,616 2,131,232 787,857 1,575,713 243,517 487,034 305,543 611,086 282,672 565,343 170,955 341,910 213,846 427,691 207,615 415,230 129,730 259,461 187,954 375,907 182,031 364,061 113,136 226,271 (2) For additional information regarding the assumptions made in calculating these amounts, see Note 10, “Stock-Based Compensation,” to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2014. (3) Reflects the aggregate grant date fair value of all NQOs granted to the NEO during such year, computed in accordance with FASB ASC Topic 718. These amounts do not necessarily correspond to the actual value that will be realized by the NEO. (4) Reflects amounts earned under the MICP with respect to 2014, 2013 and 2012. Such amounts were paid in 2015, 2014 and 2013, respectively. (5)
| payout potential, and can vary significantly year-over-year based on (i) corresponding changes in salary; (ii) other one-time adjustments to salary or other reasons; (iii) actual age versus predicted age at retirement; (iv) the discount rate used to determine present value of benefit; and (v) other relevant factors. A decrease in the discount rate results in an increase in the present value of the accumulated benefit without any increase in the benefits payable to the NEO at retirement and an increase in the discount rate has the opposite effect. Generally, the amounts in this column were calculated assuming retirement at age 65, which is the normal retirement age under the relevant pension plans and arrangements. In the case of Mr. Krakower who is over age 65, we assumed retirement at his current age. The interest rate and mortality assumptions used are consistent with those used in the preparation of our financial statements. See Note 7, “Retirement and Other Postretirement Benefit Plans” to the consolidated financial statements, and the discussion under the heading “Retirement and Other Postretirement Benefit Plans” in Management’s Discussion and Analysis of Financial Condition and Results of Operations, each included in our Annual Report on Form 10-K for the year ended December 31, 2014, for a description of these interest rate and mortality assumptions. The actuarial present value of executive pension benefits increased significantly during 2014 in part due to the combined impact of a lower discount rate and lower lump sum conversion rates, resulting in increases in reported compensation of the NEOs. The amount of the increase attributed solely to the change in discount rate and lump sum conversion rates was as follows: Mr. Stanage: $294,402; Mr. Pensky $151,357; Mr. Krakower: $148,737; Mr. Hennemuth: $89,109. |
| (6) | The amounts in the “All Other Compensation Column” for 2014 include the following: |
Name | Hexcel Contributions to 401(K) Retirement Savings Plan | Hexcel Contributions to Nonqualified Deferred Compensation Plan | Cash in Lieu of 401(K) Contributions on Earnings Exceeding ERISA Limits | Premiums for Life Insurance | Premiums for Long-Term Disability Insurance | Perquisites Allowance(a) | ||||||||||||||||||
Nick L. Stanage | $21,415 | $83,959 | — | $2,970 | $2,125 | — | ||||||||||||||||||
Wayne C. Pensky | $26,615 | $54,609 | — | $1,980 | $2,789 | $22,600 | ||||||||||||||||||
Ira J. Krakower | $26,615 | — | $33,963 | $20,941 | (b) | $564 | $22,600 | |||||||||||||||||
Robert G. Hennemuth | $21,415 | $30,331 | — | $1,980 | $2,789 | $17,600 | ||||||||||||||||||
| (a) | The perquisites allowance consists of a car allowance of $12,000 and an additional amount of $10,600 (in the case of Messrs. Pensky and Krakower) and $5,600 (in the case of Mr. Hennemuth). The additional amount may be used for reimbursement of club membership dues, expenses incurred for financial counseling and tax planning and preparation, and premiums for supplemental life and health insurance beyond the standard life and health insurance available to our executive. The additional amount was used by the NEOs for the following benefits: Mr. Pensky—supplemental life insurance; Mr. Krakower—tax planning, tax preparation and financial planning; and Mr. Hennemuth—supplemental life insurance. While the compensation committee always has the discretion to authorize additional perquisites for an NEO, our perquisites allowance has remained unchanged since 2000. Mr. Stanage does not receive any perquisites. |
| (b) | This amount includes $10,289 which represented the tax gross up on amounts paid to Mr. Krakower for the purchase of life insurance to offset a portion of the company’s obligation to provide an in-service death benefit to Mr. Krakower pursuant to his executive severance agreement. |
Name and Principal Position | Year | Salary ($) | Stock Awards ($)(1)(2) | Option Awards ($)(2)(3) | Non-Equity Incentive Plan Compensation ($)(4) | Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)(5) | All Other Compensation ($)(6) | Total ($) | |||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
David E. Berges; | 2011 | 950,000 | 1,187,495 | 1,187,525 | 1,686,250 | 3,423,576 | 171,555 | 8,606,400 | |||||||||||||||||
Chairman and CEO | 2010 | 923,113 | 1,153,896 | 1,153,891 | 1,846,226 | 3,485,791 | 110,506 | 8,673,423 | |||||||||||||||||
| 2009 | 905,013 | 1,153,891 | 1,153,832 | 1,386,208 | 3,900,944 | 97,271 | 8,597,159 | ||||||||||||||||||
Nick L. Stanage; | 2011 | 545,700 | 436,547 | 436,570 | 726,463 | 382,643 | 81,543 | 2,609,466 | |||||||||||||||||
President(8) | 2010 | 535,000 | 401,251 | 401,251 | 802,500 | 320,100 | 399,005 | 2,859,107 | |||||||||||||||||
| 2009 | 72,019 | 999,999 | — | 102,432 | 39,203 | 1,852 | 1,215,505 | ||||||||||||||||||
Wayne C. Pensky; | 2011 | 390,958 | 322,541 | 322,547 | 451,068 | 277,813 | 112,430 | 1,877,357 | |||||||||||||||||
SVP and CFO | 2010 | 375,921 | 300,731 | 300,738 | 488,697 | 256,245 | 73,248 | 1,795,580 | |||||||||||||||||
| 2009 | 368,550 | 294,846 | 294,825 | 366,930 | 358,169 | 74,283 | 1,757,603 | ||||||||||||||||||
Ira J. Krakower; | 2011 | 359,890 | 251,939 | 251,930 | 415,223 | 873,618 | 115,507 | 2,268,107 | |||||||||||||||||
SVP; General Counsel; | 2010 | 349,408 | 244,596 | 244,585 | 454,230 | 719,958 | 54,068 | 2,066,845 | |||||||||||||||||
Secretary | 2009 | 341,219 | 238,846 | 238,839 | 339,719 | 858,643 | 69,257 | 2,086,523 | |||||||||||||||||
Robert G. Hennemuth; | 2011 | 337,958 | 219,681 | 219,677 | 329,931 | 187,640 | 69,167 | 1,364,054 | |||||||||||||||||
SVP—Human Resources | 2010 | 326,845 | 212,441 | 212,449 | 359,350 | 169,526 | 36,544 | 1,317,155 | |||||||||||||||||
| 2009 | 320,436 | 208,278 | 208,272 | 269,947 | 183,208 | 52,104 | 1,242,245 | ||||||||||||||||||
| | 2011 | 2010 | 2009 | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | Amount included in Stock Awards above (target) | Maximum amount | Amount included in Stock Awards above (target) | Maximum amount | Amount included in Stock Awards above (target) | Maximum amount | |||||||||||||
David E. Berges | 593,747 | 1,187,495 | 576,948 | 1,153,896 | 576,946 | 1,153,891 | |||||||||||||
Nick L. Stanage | 218,274 | 436,547 | 200,626 | 401,251 | — | — | |||||||||||||
Wayne C. Pensky | 161,271 | 322,541 | 150,366 | 300,731 | 147,423 | 294,846 | |||||||||||||
Ira J. Krakower | 125,969 | 251,939 | 122,298 | 244,596 | 119,423 | 238,846 | |||||||||||||
Robert G. Hennemuth | 109,841 | 219,681 | 106,221 | 212,441 | 104,139 | 208,278 | |||||||||||||
39
The increase in pension value during 2011 resulted from a decrease in the ASC 715 interest rate (formerly referred to as FAS 87) used to calculate a lump sum payment. In addition, because SERP benefits are based on a final average pay formula that is based on the highest paid 36 of the last 60 months, a higher than average 2011 cash incentive award contributed to the increase in the SERP benefits for Messrs. Berges and Krakower.
Name | Hexcel Contributions to 401(K) Retirement Savings Plan | Hexcel Contributions to Nonqualified Deferred Compensation Plan | Cash in Lieu of 401(K) Contributions on Earnings Exceeding ERISA Limits | Premiums for Life Insurance | Premiums for Long-Term Disability Insurance | Perquisites Allowance(a) | Other | |||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
David E. Berges | $ | 23,275 | — | $ | 143,846 | $ | 3,870 | $ | 564 | — | — | |||||||||||
Nick L. Stanage | $ | 23,275 | — | $ | 55,231 | $ | 2,473 | $ | 564 | — | — | |||||||||||
Wayne C. Pensky | $ | 28,175 | $ | 58,618 | — | $ | 2,473 | $ | 564 | $ | 22,600 | — | ||||||||||
Ira J. Krakower | $ | 28,175 | — | $ | 42,704 | $ | 21,464 | (b) | $ | 564 | $ | 22,600 | — | |||||||||
Robert G. Hennemuth | $ | 23,275 | $ | 9,435 | $ | 15,819 | $ | 2,473 | $ | 564 | $ | 17,600 | — | |||||||||
40
Grants of Plan-Based Awards in 2011
2014
| | | | | | | | | | All Other Stock Awards: Number of Shares of Stock or Units (#)(4) | All Other Option Awards: Number of Securities Underlying Options (#)(5) | | | |||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | Date Board or Compensation Committee took Action to Grant Such Award(3) | Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1) | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(6) | |||||||||||||||||||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | ||||||||||||||||||||||||||||||
David E. Berges | — | — | 475,000 | 950,000 | 1,900,000 | — | — | — | — | — | — | — | |||||||||||||||||||||||||
| 01/31/2011 | 01/24/2011 | — | — | — | 15,609 | 31,217 | 64,434 | — | — | — | 593,747 | ||||||||||||||||||||||||||
| 01/31/2011 | 01/24/2011 | — | — | — | — | — | — | 31,217 | — | — | 593,747 | ||||||||||||||||||||||||||
| 01/31/2011 | 01/24/2011 | — | — | — | — | — | — | — | 155,232 | 19.02 | 1,187,495 | ||||||||||||||||||||||||||
Nick L. Stanage | — | — | 204,638 | 409,275 | 818,550 | — | — | — | — | — | — | — | |||||||||||||||||||||||||
| 01/31/2011 | 01/24/2011 | — | — | — | 5,738 | 11,476 | 22,952 | — | — | — | 218,274 | ||||||||||||||||||||||||||
| 01/31/2011 | 01/24/2011 | — | — | — | — | — | — | 11,476 | — | — | 218,274 | ||||||||||||||||||||||||||
| 01/31/2011 | 01/24/2011 | — | — | — | — | — | — | — | 57,068 | 19.02 | 436,570 | ||||||||||||||||||||||||||
Wayne C. Pensky | — | — | 127,061 | 254,123 | 508,245 | — | — | — | — | — | — | — | |||||||||||||||||||||||||
| 01/31/2011 | 01/24/2011 | — | — | — | 4,240 | 8,479 | 16,958 | — | — | — | 161,271 | ||||||||||||||||||||||||||
| 01/31/2011 | 01/24/2011 | — | — | — | — | — | — | 8,479 | — | — | 161,271 | ||||||||||||||||||||||||||
| 01/31/2011 | 01/24/2011 | — | — | — | — | — | — | — | 42,163 | 19.02 | 322,541 | ||||||||||||||||||||||||||
Ira J. Krakower | — | — | 116,964 | 233,929 | 467,857 | — | — | — | — | — | — | — | |||||||||||||||||||||||||
| 01/31/2011 | 01/24/2011 | — | — | — | 3,312 | 6,623 | 13,246 | — | — | — | 125,969 | ||||||||||||||||||||||||||
| 01/31/2011 | 01/24/2011 | — | — | — | — | — | — | 6,623 | — | — | 125,969 | ||||||||||||||||||||||||||
| 01/31/2011 | 01/24/2011 | — | — | — | — | — | — | — | 32,932 | 19.02 | 251,930 | ||||||||||||||||||||||||||
Robert G. Hennemuth | — | — | 92,938 | 185,877 | 371,754 | — | — | — | — | — | — | — | |||||||||||||||||||||||||
| 01/31/2011 | 01/24/2011 | — | — | — | 2,888 | 5,775 | 11,550 | — | — | — | 109,841 | ||||||||||||||||||||||||||
| 01/31/2011 | 01/24/2011 | — | — | — | — | — | — | 5,775 | — | — | 109,841 | ||||||||||||||||||||||||||
| 01/31/2011 | 01/24/2011 | — | — | — | — | — | — | — | 28,716 | 19.02 | 219,677 | ||||||||||||||||||||||||||
Name | Grant Date | Date Board or Compensation Committee took Action to Grant Such Award(3) |
Estimated Future Payouts Under |
Estimated Future Payouts Under | All Other Stock Awards: Number of Shares of Stock or Units (#)(4) | All Other Option Awards: Number of Securities Underlying Options (#)(5) | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(6) | ||||||||||||||||||||||||||||||||||||||||
| Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||||||||||||||||||
Nick L. Stanage | — | — | 387,500 | 775,000 | 1,550,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| 01/28/2014 | 01/22/2014 | — | — | — | 12,388 | 24,776 | 49,552 | — | — | — | 1,065,616 | |||||||||||||||||||||||||||||||||||||
| 01/28/2014 | 01/22/2014 | — | — | — | — | — | — | — | 34,912 | 43.01 | 639,366 | |||||||||||||||||||||||||||||||||||||
Wayne C. Pensky | — | — | 174,598 | 349,196 | 698,393 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| 01/28/2014 | 01/22/2014 | — | — | — | 3,552 | 7,104 | 14,208 | — | — | — | 305,543 | |||||||||||||||||||||||||||||||||||||
| 01/28/2014 | 01/22/2014 | — | — | — | — | — | — | 4,736 | — | — | 203,695 | |||||||||||||||||||||||||||||||||||||
| 01/28/2014 | 01/22/2014 | — | — | — | — | — | — | — | 16,684 | 43.01 | 305,545 | |||||||||||||||||||||||||||||||||||||
Ira J. Krakower | — | — | 137,642 | 275,283 | 550,567 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| 01/28/2014 | 01/22/2014 | — | — | — | 2,486 | 4,972 | 9,944 | — | — | — | 213,846 | |||||||||||||||||||||||||||||||||||||
| 01/28/2014 | 01/22/2014 | — | — | — | — | — | — | 3,315 | — | — | 142,578 | |||||||||||||||||||||||||||||||||||||
| 01/28/2014 | 01/22/2014 | — | — | — | — | — | — | — | 11,676 | 43.01 | 213,830 | |||||||||||||||||||||||||||||||||||||
Robert G. Hennemuth | — | — | 111,381 | 222,762 | 445,524 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||
| 01/28/2014 | 01/22/2014 | — | — | — | 2.185 | 4,370 | 8,740 | — | — | — | 187,954 | |||||||||||||||||||||||||||||||||||||
| 01/28/2014 | 01/22/2014 | — | — | — | — | — | — | 2,913 | — | — | 125,288 | |||||||||||||||||||||||||||||||||||||
| 01/28/2014 | 01/22/2014 | — | — | — | — | — | — | — | 10,263 | 43.01 | 187,953 | |||||||||||||||||||||||||||||||||||||
| (1) | The amounts shown reflect the range of potential awards for 2014 under the MICP. The actual awards paid for 2014 are shown in the “Non-Equity Incentive Plan Compensation” column in the Summary Compensation Table above. If the threshold performance for any measure under the MICP is not attained, no portion of the MICP award attributable to that measure is paid. More detail concerning the 2014 MICP performance measures can be found on page 30. |
| (2) | Reflects PSAs granted under the 2013 ISP, which will convert into shares of Hexcel common stock after a three-year performance period if we achieve the required performance. The terms of the PSAs are described in more detail on pages 32-33. |
| (3) | For our regular annual equity awards, the committee approved a dollar value (as a percentage of salary) and the algorithm under which the awards would be converted into shares at its meeting on January 22, 2014. In accordance with our equity grant policy, the grant date for the 2014 annual equity awards was January 28, 2014, the third trading day following the release of 2013 fourth-quarter and year-end earnings. |
| (4) | Reflects RSUs granted under the 2013 ISP, which will vest and convert into shares at the rate of one-third on each of the first three anniversaries of the grant date. The terms of the RSUs are described in more detail on page 32. |
| (5) | Reflects NQOs granted under the 2013 ISP, which will vest and become exercisable at the rate of one-third on each of the first three anniversaries of the grant date. The terms of the NQOs are described in more detail on page 31. |
| (6) | Reflects the full grant date fair value of PSAs, RSUs and NQOs as computed in accordance with the provisions of FASB ASC Topic 718 granted to the NEOs in 2014. Generally, the full grant date fair value is the amount that we will expense in our financial statements over the award’s vesting schedule. For RSUs, fair value is calculated using the closing price of our common stock on the grant date. For PSAs, fair value is calculated using the target number of shares of common stock subject to the PSA award and the closing price of our common stock on the grant date. For NQOs, fair value is calculated using the applicable Black-Scholes value on the grant date. For additional information on the valuation assumptions, see Note 10, “Stock-Based Compensation,” to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2014. These amounts reflect the company’s accounting expense, and do not necessarily correspond to the actual value that will be realized by the NEOs. |
Employment AgreementOffer Letter with Mr. Berges
Stanage
On July 22, 2013, we entered into a new employment arrangement (the “ Offer Letter”) with Mr. Berges'Stanage setting forth the terms and conditions of his continued employment agreement, as amendedPresident and restated as of December 31, 2008, provides for Mr. Berges to be our Chairman and Chief Executive Officer. The agreement will automatically be extended for successive one-year terms unless either Mr. Berges or the company gives at least one year's prior notice to the other that the agreement shall not be extended. As no notice was given by Mr. Berges or the company (after an affirmative determination by the board not to give notice), the agreement is currently in force until July 30, 2013. Mr. Berges may terminate the agreement for good reason or upon 30 days' notice to us. The agreementOfficer effective August 1, 2013, which provides that Mr. Berges is entitled to:as follows:
an annual base salary of not less than his current salary, subject to annual review by the compensation committee;
41$775,000
Under the employment agreement, on July 30, 2001 we granted Mr. Berges separate options to purchase 550,000 and 275,000 shares of Hexcel common stock. Each of the options had a term of ten years and an exercise price of $10.50 per share. The option to purchase 550,000 shares vested over four years at a rate of one-sixteenth of the shares at the end of each three-month period beginning with the three-month period ending October 31, 2001. The option to purchase 275,000 shares provided that it would vest and become exercisable in full on the day immediately preceding the expiration date of the option (July 29, 2011), subject to earlier vesting in equal one-third parts if the price of a share of Hexcel common stock reached $15.75, $21.00 and $26.25 over consecutive thirty-day trading periods. The option vested as to one-third of the underlying shares in 2005 as Hexcel common stock closed at $15.75 or higher for thirty consecutive days and vested as to an additional one-third of the underlying shares in 2006 as Hexcel stock closed at $21.00 or higher for thirty consecutive days. The final one-third of the underlying shares vested on July 29, 2011. Both of the options granted to Mr. Berges pursuant to his employment agreement expired on July 30, 2011.
Mr. Berges' employment agreement also provides that we will make payments to Mr. Berges upon his termination of employment with us under various circumstances, and imposes certain obligations on Mr. Berges following termination. These provisions are described on pages 49-51.
Employment and Severance Agreement with Mr. Stanage
We entered into an employment and severance agreement with Mr. Stanage when he began his employment with us on November 9, 2009. The initial term of the agreement is three years. The agreement is automatically extended for additional one-year periods unless the company gives at least one year's prior notice to Mr. Stanage that we are not extending the term of the agreement. The agreement provides for
an annual equity award in subsequent years2014 valued within a rangeat 220% of 140% to 210% ofhis base salary as determined by the compensation committee. All annual equity awards will be valued and granted in such form as determined by the compensation committee for all executives
continued participation in all of our employee benefit plans and arrangements applicable to senior level executives, except that Mr. Stanage will not participate in our executive perquisites program
In addition, Mr. Stanage received certain relocation benefits designed to assist him in the purchase of a home in the Stamford, CT area, including a lump sum payment of $325,000 that was paid at the time of closing on the purchase of a home in the Stamford, CT area; this amount was not grossed up for taxes, and Mr. Stanage must repay this amount to us if Mr. Stanage voluntarily terminates his employment or is terminated by us for cause prior to November 9, 2012.
Mr. Stanage's employment and severance agreementThe Offer Letter also provides that we will make payments to Mr. Stanage upon his termination of employment with us under various circumstances under the terms of the Hexcel Corporation Executive Severance Policy (described on page 49), and imposes certain obligations on Mr. Stanage following termination. These provisions are describedtermination (described on pages 49-51.page 50).
Description of Plan-Based Awards
All NQOs, RSUs and PSAs granted to the NEOs in fiscal year 20112014 were granted under the 2013 ISP and are governed by the terms and conditions of the 2013 ISP and the applicable award agreements. See pages 29-3230-33 of this proxy statement for a detailed discussion of NQOs, RSUs and PSAs.
42
Outstanding Equity Awards at 20112014 Fiscal Year-End
The following table provides information on the holdings of outstanding stock options and unvested stock awards held by the NEOs as of December 31, 2011:2014:
| | Option Awards | Stock Awards | |||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable(1) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($/Sh) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(2) | Market Value of Shares or Units of Stock That Have Not Vested ($)(3) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(4) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(3) | ||||||||||||||||||
David E. Berges | |||||||||||||||||||||||||||
| 221,486 | 5,362,176 | 85,075 | 2,059,666 | ||||||||||||||||||||||||
| 155,232 | 19.02 | 01/31/2021 | |||||||||||||||||||||||||
| 73,978 | 147,954 | 10.90 | 02/01/2020 | ||||||||||||||||||||||||
| 188,535 | 94,267 | 7.83 | 01/26/2019 | ||||||||||||||||||||||||
| 74,599 | 21.11 | 01/28/2018 | |||||||||||||||||||||||||
| 121,505 | 18.17 | 01/29/2017 | |||||||||||||||||||||||||
| 85,058 | 22.00 | 02/07/2016 | |||||||||||||||||||||||||
| 121,082 | 14.51 | 01/06/2015 | |||||||||||||||||||||||||
| 145,257 | 7.38 | 01/06/2014 | |||||||||||||||||||||||||
Nick L. Stanage | 51,734 | 1,252,480 | 29,951 | 725,114 | |||||||||||||||||||||||
| 57,068 | 19.02 | 01/31/2021 | |||||||||||||||||||||||||
| 25,725 | 51,449 | 10.90 | 02/01/2020 | ||||||||||||||||||||||||
Wayne C. Pensky | 57,277 | 1,386,676 | 22,375 | 541,699 | |||||||||||||||||||||||
| 42,163 | 19.02 | 01/31/2021 | |||||||||||||||||||||||||
| 19,281 | 38,561 | 10.90 | 02/01/2020 | ||||||||||||||||||||||||
| 48,174 | 24,087 | 7.83 | 01/26/2019 | ||||||||||||||||||||||||
| 19,950 | 21.11 | 01/28/2018 | |||||||||||||||||||||||||
| 8,542 | 18.17 | 01/29/2017 | |||||||||||||||||||||||||
| 5,432 | 22.00 | 02/07/2016 | |||||||||||||||||||||||||
| 8,252 | 14.51 | 01/06/2015 | |||||||||||||||||||||||||
| 15,937 | 7.38 | 01/06/2014 | |||||||||||||||||||||||||
Ira J. Krakower | 46,183 | 1,118,090 | 18,037 | 436,676 | |||||||||||||||||||||||
| 32,932 | 19.02 | 01/31/2021 | |||||||||||||||||||||||||
| 15,681 | 31,361 | 10.90 | 02/01/2020 | ||||||||||||||||||||||||
| 39,026 | 19,513 | 7.83 | 01/26/2019 | ||||||||||||||||||||||||
| 15,433 | 21.11 | 01/28/2018 | |||||||||||||||||||||||||
| 25,772 | 18.17 | 01/29/2017 | |||||||||||||||||||||||||
| 16,585 | 22.00 | 02/07/2016 | |||||||||||||||||||||||||
| 20,888 | 14.51 | 01/06/2015 | |||||||||||||||||||||||||
| 47,129 | 7.38 | 01/06/2014 | |||||||||||||||||||||||||
Robert G. Hennemuth | 40,245 | 974,331 | 15,679 | 379,589 | |||||||||||||||||||||||
| 28,716 | 19.02 | 01/31/2021 | |||||||||||||||||||||||||
| 13,621 | 27,240 | 10.90 | 02/01/2020 | ||||||||||||||||||||||||
| 9,031 | 17,016 | 7.83 | 01/26/2019 | ||||||||||||||||||||||||
| 13,495 | 21.11 | 01/28/2018 | |||||||||||||||||||||||||
| 24,388 | 18.17 | 01/29/2017 | |||||||||||||||||||||||||
| 13,363 | 20.82 | 03/20/2016 | |||||||||||||||||||||||||
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable(1) | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($/Sh) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#)(2) | Market Value of Shares or Units of Stock That Have Not Vested ($)(3) | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)(4) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)(3) | |||||||||||||||||||||||||
Nick L. Stanage | 21,961 | 911,162 | 52,645 | 2,184,241 | ||||||||||||||||||||||||||||||
| 34,912 | 43.01 | 01/28/2024 | ||||||||||||||||||||||||||||||||
| 13,774 | 27,547 | 28.27 | 01/28/2023 | |||||||||||||||||||||||||||||||
| 31,042 | 15,520 | 25.03 | 01/30/2022 | |||||||||||||||||||||||||||||||
| 57,068 | 19.02 | 01/31/2021 | ||||||||||||||||||||||||||||||||
| 77,174 | 10.90 | 02/01/2020 | ||||||||||||||||||||||||||||||||
Wayne C. Pensky | 24,597 | 1,020,530 | 17,103 | 709,603 | ||||||||||||||||||||||||||||||
| 16,684 | 43.01 | 01/28/2024 | ||||||||||||||||||||||||||||||||
| 8,237 | 16,473 | 28.27 | 01/28/2023 | |||||||||||||||||||||||||||||||
| 21,791 | 10,895 | 25.03 | 01/30/2022 | |||||||||||||||||||||||||||||||
| 42,163 | 19.02 | 01/31/2021 | ||||||||||||||||||||||||||||||||
| 57,842 | 10.90 | 02/01/2020 | ||||||||||||||||||||||||||||||||
| 72,261 | 7.83 | �� | 01/26/2019 | |||||||||||||||||||||||||||||||
| 19,950 | 21.11 | 01/28/2018 | ||||||||||||||||||||||||||||||||
| 8,542 | 18.17 | 01/29/2017 | ||||||||||||||||||||||||||||||||
| 5,432 | 22.00 | 02/07/2016 | ||||||||||||||||||||||||||||||||
Ira J. Krakower | 26,279 | 1,090,316 | 12,316 | 510,991 | ||||||||||||||||||||||||||||||
| 11,676 | 43.01 | 01/28/2024 | ||||||||||||||||||||||||||||||||
| 6,050 | 12,098 | 28.27 | 01/28/2023 | |||||||||||||||||||||||||||||||
| 16,539 | 8,268 | 25.03 | 01/30/2022 | |||||||||||||||||||||||||||||||
| 32,932 | 19.02 | 01/31/2021 | ||||||||||||||||||||||||||||||||
| 47,042 | 10.90 | 02/01/2020 | ||||||||||||||||||||||||||||||||
| 58,539 | 7.83 | 01/26/2019 | ||||||||||||||||||||||||||||||||
| 15,433 | 21.11 | 01/28/2018 | ||||||||||||||||||||||||||||||||
| 25,772 | 18.17 | 01/29/2017 | ||||||||||||||||||||||||||||||||
| 16,585 | 22.00 | 02/07/2016 | ||||||||||||||||||||||||||||||||
Robert G. Hennemuth | 15,978 | 662,927 | 10,809 | 448,465 | ||||||||||||||||||||||||||||||
| 10,263 | 43.01 | 01/28/2024 | ||||||||||||||||||||||||||||||||
| 5,305 | 10,608 | 28.27 | 01/28/2023 | |||||||||||||||||||||||||||||||
| 14,421 | 7,210 | 25.03 | 01/30/2022 | |||||||||||||||||||||||||||||||
| 13,495 | 21.11 | 01/28/2018 | ||||||||||||||||||||||||||||||||
| 12,388 | 18.17 | 01/29/2017 | ||||||||||||||||||||||||||||||||
| | RSUs under the ISP(a) | Earned PSAs(b) | |||||
|---|---|---|---|---|---|---|---|
David E. Berges | 91,065 | 130,421 | |||||
Nick L. Stanage | 51,734 | 0 | |||||
Wayne C. Pensky | 23,951 | 33,326 | |||||
Ira J. Krakower | 19,187 | 26,996 | |||||
Robert G. Hennemuth | 16,704 | 23,541 | |||||
| (1) | All options listed in this table vest at a rate of one-third per year on each of the first three anniversaries of the grant date. The grant date for each option is the date ten years prior to the option expiration date, as all options have a ten year term. |
43
| (2) | This column reflects the following: |
| RSUs under the ISP(a) | Earned PSAs(b) | |||||||
Nick L. Stanage | 3,243 | 18,718 | ||||||
Wayne C. Pensky | 11,457 | 13,140 | ||||||
Ira J. Krakower | 16,307 | 9,972 | ||||||
Robert G. Hennemuth | 7,282 | 8,696 | ||||||
| (a) | RSUs granted under the 2003 ISP and 2013 ISP, which generally vest and convert into shares at the rate of one-third per year on each of the first three anniversaries of the grant date, except for 8,000 RSUs granted to Mr. Krakower in 2013, which vest and convert into shares as to 50% of the award on each of the second and third anniversaries of the grant date. |
| (b) | PSAs for which the performance period has ended and the level of performance has been determined. |
| (3) | Values were computed using a price of $41.49 per share, the closing price of Hexcel common stock on December 31, 2014. |
| (4) | This column reflects the shares that each NEO would receive based on the target award for the PSAs granted on January 28, 2013 and on January 28, 2014. The January 28, 2013 grants, including the number of shares that will be awarded to each NEO if the threshold, target or maximum levels of the performance measure were obtained, are included in the “Grants of Plan-Based Awards in 2013” table contained in our Proxy Statement on Schedule 14A for the 2014 Annual Meeting of Stockholders under the column “Estimated Future Payouts Under Equity Incentive Plan Awards.” The January 28, 2014 grants, including the number of shares that will be awarded to each NEO if the threshold, target or maximum levels of the performance measure were obtained, are included in the “Grants of Plan-Based Awards in 2014” table above under the column “Estimated Future Payouts Under Equity Incentive Plan Awards.” Each NEO will receive a number of shares of common stock based on the extent to which the performance criteria for the respective PSA are attained. Any such shares will be received by the NEO in early 2016 for the 2013 PSAs and early 2017 for the 2014 PSAs. |
David E. Berges Nick L. Stanage Wayne C. Pensky Ira J. Krakower Robert G. Hennemuth Name Nick L. Stanage Wayne C. Pensky Ira J. Krakower Robert G. Hennemuth Our NEOs participate in the following pension plans and arrangements: Supplemental Executive Retirement Agreements with Messrs. We have entered into supplemental executive retirement agreements (each a The monthly normal retirement benefit is equal to the product of the Final average pay equals the (3)Values were computed using a price of $24.21 per share, the closing price of Hexcel common stock on December 30, 2011.(4)This column reflects the shares that each NEO would receive under the PSAs granted on February 1, 2010 and January 31, 2011 based on actual performance during the applicable performance periods and assuming that the NEO's employment is terminated as of December 30, 2011. The January 31, 2011 grants, including the number of shares that will be awarded to each NEO if the threshold, target or maximum levels of the performance measure were obtained, are included in the "Grants of Plan-Based Awards in 2011" table above under the column "Estimated Future Payouts Under Equity Incentive Plan Awards." Each NEO will receive a number of shares of common stock based on the extent to which the performance criteria for the respective PSA are attained. Any such shares will be received by the NEO in early 2013 for the 2010 PSAs and early 2014 for the 2011 PSAs.
Option Exercises and Stock Vested in 2011
2014 Option Awards Stock Awards(1) Name Number of
Shares
Acquired
on Exercise
(#) Value Realized
on Exercise
($) Number of
Shares
Acquired
on Vesting
(#) Value Realized
on Vesting
($) 958,760 12,658,240 53,949 1,033,435 — — 34,123 783,573 37,466 767,341 18,274 346,716 151,885 3,466,468 15,253 290,584 25,000 318,500 9,806 187,857 (1)Reflects RSUs that vested during 2011. This includes RSUs that were granted in 2008, 2009 and 2010, with a vesting schedule of one-third of the shares subject to the grant on each of the three anniversaries of the grant date. Included in the shares listed for Mr. Pensky are 4,259 RSUs underlying an award granted to Mr. Pensky under our Management Stock Purchase Plan ("MSPP") on January 22, 2008 that converted into shares in 2011. The RSUs vested at the rate of one-third per year for three years, and converted to shares of Hexcel common stock on a one-to-one basis on the third anniversary of the grant date. Mr. Pensky deferred $68,256 of his 2007 cash incentive award to purchase 4,259 RSUs under the MSPP at a price of $16.0256 per RSU on January 22, 2008. Option Awards Stock Awards(1) Number of
Shares
Acquired
on Exercise
(#) Value Realized
on Exercise
($) Number of
Shares
Acquired
on Vesting
(#) Value Realized
on Vesting
($) — — 29,331 $ 1,326,722 — — 23,773 $ 1,070,839 — — 18,416 $ 829,930 54,763 $ 1,566,262 16,066 $ 724,010 (1) Reflects RSUs and PSAs that vested during 2014. This includes RSUs that were granted in 2011, 2012 and 2013, with a vesting schedule of one-third of the shares subject to the grant on each of the three anniversaries of the grant date, and PSAs earned under grants covering the 2011-2013 performance period.
Pension Benefits in Fiscal 2011
Year 2014Berges, Stanage and Krakower"SERP"“SERP”) with Messrs. Berges, Stanage and Krakower. Each SERP provides for a retirement benefit intended to supplement the executive'sexecutive’s retirement income from our 401(k) plan and Nonqualified Deferred Compensation Plan (described on pages 47-48)33-34). The material features of the SERPs are as follows:•executive'sexecutive’s final average pay, benefit percentage and vesting percentage, offset by any vested contributions made by us under our 401(k) plan and, in the case of Mr. Krakower, any vested contributions made by us under our supplemental 401(k) plan. Mr. Krakower'sKrakower’s benefit is also offset by his accrued benefit under our former qualified pension plan.•executive'sexecutive’s average monthly compensation for the highest paid 36 months out of his final 60 months of employment, and includes salary and cash incentive award, but not equity compensation. The cash incentive award is deemed to be earned ratably over the period in which it was earned.
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The benefits percentages are as follows:
| • | Mr. Krakower:5/12 of 1% for each of the first 60 months of service,1/4 of 1% for each of the next 60 months of service, and1/6 of 1% for each additional month of service. |
| • | Mr. Stanage:7/30 of 1% for each month of service, but shall not increase further once Mr. Stanage reaches age 65. |
Upon retirement after reaching age 65, the executive will receive a lump sum that is actuarially equivalent toeither a lifetime payment stream of the monthly normal retirement benefit starting the month after employment terminates and ending on death, butwhich is guaranteed to be at least 120 monthly payments.
If the executive'sexecutive’s employment terminates prior to age 65 (early retirement), he will receive a lump sum that is actuarially equivalent to a lifetime payment stream of the monthly normal retirement benefit, reduced by 3% for each year by which the date of the first payment precedes age 65, or the lifetime payment stream so reduced. The lump sum is based on an assumed payment stream starting the month after his employment terminates (but no earlier than the month he reaches age 55), and ends on death, but is guaranteed to be at least 120 monthly payments; any payments after death are made to a surviving beneficiary or to the executive'sexecutive’s estate. This does not apply to Mr. Krakower, as he has already attained the age of 65.
Should the executive die before receiving any benefits under the SERP, the executive'sexecutive’s designated beneficiary will receive a lump sum that is actuarially equivalent to the 50% survivor annuity the beneficiary would have received had the executive retired immediately prior to his death and elected to receive his benefit in the form of a 50% joint and survivor annuity, or receive the annuity itself. The executive also may elect to have the lump sum survivor benefit calculated on the basis of a 75% or 100% survivor annuity, or for it to equal the full lump sum he would have received had he retired immediately prior to his death. If the executive elects any of these alternative forms of benefit, the additional actuarial cost (above the cost of providing the benefit based on a 50% survivor annuity) reduces the amount of the executive'sexecutive’s retirement benefit (and hence the survivor'ssurvivor’s benefit as well).
Upon certain other types of termination, or permitted elections, the amount and form of benefit are different.
Termination for cause—no benefits are payable
Termination without cause, or by the executive for good reason
12 months of service are added for purposes of computing the benefits percentage
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For Mr. Berges andStanage, 24 months are added for purposes of computing the benefits percentage
For Mr. Krakower, 36 months of service are added for purposes of computing the benefits percentage
Upon termination due to disability, the lump sum is calculated without reduction even if the assumed payment stream would start prior to age 65.
These enhanced benefits payable upon termination are quantified in the table on page 54.
Retirement Agreements with Messrs. Pensky and Hennemuth
We have entered into Executive Deferred Compensation and Consulting Agreements (each an "EDCA"“EDCA”) with Mr. Pensky and Mr. Hennemuth. The material terms of the EDCAs are as follows:
| • | The executive is entitled to receive a monthly benefit upon retirement equal to 1/12th of his accrued benefit. The accrued benefit is equal to 1.5% of the executive’s aggregate salary and cash incentive awards earned while employed by us multiplied by a fraction of X/67, with X=the number of months the executive has been employed by us since entering into his EDCA, subject to a maximum of 67 months. |
The normal monthly retirement benefit is payable starting the month after employment terminates on or after age 65 and ending on death, but is guaranteed to be at least 120 monthly payments; any payments after death are made to a surviving beneficiary or the executive'sexecutive’s estate.
If the executive'sexecutive’s employment terminates prior to age 65, then
the payments will be actuarially reduced to reflect commencement prior to age 65
the executive'sexecutive’s monthly retirement benefit will start the calendar month after he terminates employment and will end on death, but is guaranteed to be at least 120 monthly payments; any payments after death are made to a surviving beneficiary or the executive'sexecutive’s estate.
If the executive dies prior to commencement of payments to him, a benefit is payable to his beneficiary for the duration of the beneficiary'sbeneficiary’s life, and is based on the actuarial equivalent of the early retirement benefit described above, as if the executive had retired immediately prior to his death.
Upon a change in control, the executive'sexecutive’s benefits become payable.
Upon termination for cause, no benefits are payable.
Each executive has agreed to consult with us at our request for up to ten days a year for a period of ten years following his termination of employment with us.
Each executive has agreed not to solicit our employees and not to engage in any activity competitive with our business for ten years after termination of his employment with us, unless he can show that such actions were taken without the use of confidential information regarding Hexcel.
The executive is entitled to an additional amount based on the value of our providing medical, dental and life insurance from termination of employment to age 75.75:
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the amount gets added to the value of the lump sum or increases the annuity, depending on the form of payment chosen by the executive.
Messrs. Pensky and Hennemuth have elected to receive their EDCA benefit in the form of an actuarially equivalent lump sum.
Pension Benefits Table
The table below shows the present value of accumulated benefits payable to each NEO as of December 31, 2011,2014, including the number of years of service credited to each NEO, under each pension and retirement plan listed below, determined using interest rate and mortality rate assumptions consistent with those used in our financial statements. The table also shows payments made to the NEOSNEOs under the plans indicated during 2011.2014.
Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit ($)(1) | Payments During Last Fiscal Year ($) | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
David E. Berges | Supplemental Executive Retirement Agreement | 10.42 | 17,392,792 | 0 | ||||||||
Nick L. Stanage | Supplemental Executive Retirement Agreement | 2.17 | 741,946 | 0 | ||||||||
Wayne C. Pensky | Executive Deferred Compensation Agreement | 18.42 | 1,435,500 | 0 | ||||||||
Ira J. Krakower | Supplemental Executive Retirement Agreement | 15.33 | 4,702,476 | 0 | ||||||||
Robert G. Hennemuth | Executive Deferred Compensation Agreement | 5.75 | 783,447 | 0 | ||||||||
Name | Plan Name | Number of Years Credited Service (#) | Present Value of Accumulated Benefit ($)(1) | Payments During Last Fiscal Year ($) | ||||||||||
Nick L. Stanage | Supplemental Executive Retirement Agreement | 5.17 | 2,867,334 | 0 | ||||||||||
Wayne C. Pensky | Executive Deferred Compensation Agreement | 21.42 | 2,343,728 | 0 | ||||||||||
Ira J. Krakower | Supplemental Executive Retirement Agreement | 18.33 | 4,536,967 | 0 | ||||||||||
Robert G. Hennemuth | Executive Deferred Compensation Agreement | 8.75 | 1,410,713 | 0 | ||||||||||
| (1) | Generally, the amounts in this column were calculated assuming retirement at age 65 (except with respect to Mr. Krakower, whose actual age at December 31, 2014 was used as he is over age 65), the normal retirement age under the relevant pension plans and arrangements, and using the interest rate and mortality assumptions consistent with those used in the preparation of our financial statements. See Note 7, “Retirement and Other Postretirement Benefit Plans” to the consolidated financial statements, and the discussion under the heading “Retirement and Other Postretirement Benefit Plans” in Management’s Discussion and Analysis of Financial Condition and Results of Operations, each included in our Annual Report on Form 10-K for the year ended December 31, 2014, for a description of these interest rate and mortality assumptions. |
These amounts represent the amounts required to be disclosed by SEC rules, and assume that each currently active executive will retire at the normal retirement age under the plan, which is age 65 (except with respect to Mr. Krakower, who was over age 65 at December 31, 2011)2014), and reflect a discount rate of 3.20% to determine the present value of the lump sum payable at age 65 whichfor Messrs. Stanage, Pensky and Hennemuth. For Mr. Krakower, 3.40% is the assumed discount rate isin determining the present value of his elected annuity form of payment. These rates are consistent with those used for purposes of pension calculations in our financial statements. See footnote (5) to the Summary Compensation Table on page 40 for a description of how the difference between the actuarial present value of the executive’s accumulated benefit under his SERP or EDCA, as applicable, as of December 31 of the current year and December 31 of the prior year is calculated.
Nonqualified Deferred Compensation in Fiscal Year 2011
2014
All information in the table below is with respect to our Nonqualified Deferred Compensation Plan ("NDCP") or our MSPP. The NDCP, is an unfunded plan that permits a select number of highly compensated employees to defer a percentage of their pay and receive Hexcel matching and profit sharing contributions above the IRS limits permitted under our qualified 401(k) plan. Terms of the plan are as follows:
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Mr.pages 33-34. Messrs. Stanage, Pensky and Mr. Hennemuth participated in the NDCP in 2011. Messrs. Berges, Stanage and2014. Mr. Krakower did not participate in the NDCP in 2011,2014, and instead received a taxable cash payment equal to the profit sharing contributions and the 2% fixed company contribution theyhe would have received if theyhe participated, but no company match. Our contributions to this plan for the NEOs or related payments to the NEOs in 2011 are included in "All Other Compensation" in the Summary Compensation Table on page 39.
Until 2007, the MSPP provided certain senior executives the opportunity to defer and apply a portion of their MICP award to purchase RSUs at a price of 80% of the average closing price of Hexcel common stock for the five days preceding the date of grant. The MSPP was discontinued in 2007 and expired under its own terms in 2010.
| Name of Plan | Executive Contributions in Last FY($) | Registrant Contributions in Last FY($)(1) | Aggregate Earnings in Last FY($)(2) | Aggregate Balance at Last FYE($)(3) | ||||||||||||||||
Nick L. Stanage | NDCP | 100,154 | 83,959 | 12,052 | 301,361 | |||||||||||||||
Wayne C. Pensky | NDCP | 27,578 | 54,609 | 35,351 | 771,054 | |||||||||||||||
Ira J. Krakower | NDCP | — | — | — | — | |||||||||||||||
Robert G. Hennemuth | NDCP | 13,994 | 30,331 | 10,639 | 232,117 | |||||||||||||||
| | Name of Plan | Executive Contributions in Last FY($) | Registrant Contributions in Last FY($)(1) | Aggregate Earnings in Last FY($)(2) | Aggregate Balance at Last FYE($)(3) | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
David E. Berges | NDCP | — | — | 16,183 | 365,545 | ||||||||||
Nick L. Stanage | NDCP | — | — | — | — | ||||||||||
Wayne C. Pensky | NDCP | 25,323 | 58,618 | 8,683 | 352,472 | ||||||||||
| MSPP | — | — | 11,600 | (4) | — | ||||||||||
Ira J. Krakower | NDCP | — | — | — | — | ||||||||||
Robert G. Hennemuth | NDCP | 910 | 9,435 | 2,199 | 67,773 | ||||||||||
| (1) | Our contributions to the NDCP or related payments to the NEOs in 2014 are included in the “All Other Compensation” column in the Summary Compensation Table on page 40. See footnote (6) to the Summary Compensation Table on page 40 for a description of the amount of such contributions for each NEO. |
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| (2) | The aggregate annual earnings in 2014 are not reported in the Summary Compensation Table, as SEC rules provide that only above-market or preferential earnings be reported in that table. |
| (3) | This column includes the NEO’s contributions to the NDCP in prior years, and our contributions to the NDCP in prior years, which were also included in the Summary Compensation Table for the year in which the amount was contributed, as well as earnings on those contributions. |
Potential Payments upon Termination or Change in Control
Executive Severance Policy
The committee maintains an Executive Severance Policy that applies to any executive employee of the company who has received an offer letter of employment from the company that expressly extends the provisions of the policy to such executive.
The policy provides that
upon termination of the covered executive’s employment for any reason the executive shall receive certain accrued and vested payments
upon termination due to the executive’s death, the executive’s legal representative shall receive a pro rata portion of the executive’s annual bonus (the “pro-rata bonus”)
upon termination due to the executive’s disability, the executive shall receive the pro-rata bonus and certain disability benefits
upon termination by the company other than for disability or cause or a resignation by the executive for good reason, the executive shall receive
the pro-rata bonus
a cash lump sum equal to the sum of the executive’s annual base salary and the average of the last three annual bonus amounts awarded to the executive for the last three plan years completed prior to the termination date, multiplied by a multiple specified in the executive’s offer letter
continuation of certain medical and other benefits for the period following the termination date that is specified in the executive’s offer letter
The compensation committee may amend or terminate the policy in its discretion, but no amendment or termination shall adversely affect a covered executive’s vested rights and no amendment or termination can become effective as to an executive earlier than the later of one year after written notice is delivered to such executive or two years after the occurrence of a change in control.
Severance Agreements and Arrangements
Under his Offer Letter, upon his termination of employment, Mr. Stanage will be entitled to receive severance pursuant to the Executive Severance Policy. The multiples applicable for determining Mr. Stanage’s severance payments and period of post-employment benefits continuation under the policy are:
Under
2.5X in the case of a qualifying termination during a limited period prior to, or within two years following, a change in control or
1.5X in the case of all other qualifying terminations
The Executive Severance Policy does not provide for a gross-up for excise taxes incurred under Section 280G and Section 4999 of the Code. See “Severance and Change in Control Arrangements—Modified Gross-Up” on pages 35-36.
Mr. Berges' employment agreement, we haveStanage has agreed that, in consideration for these payments, he will not compete with us in any capacity for a period of eighteen months following the termination of his employment. This includes, for example, any situation in which Mr. Stanage is an employee or consultant to, or owner of a business. If Mr. Stanage’s termination is in connection with a change in control for which Mr. Stanage receives enhanced severance, the period is extended to thirty months. However, his restriction would not apply if Mr. Stanage’s duties and responsibilities with a company that competes with us do not relate to the business segment of that company that competes with us. Mr. Stanage also agreed to makecustomary terms regarding our ownership of, and the protection and confidentiality of, our trade secrets, proprietary information and processes, technologies, designs and inventions.
We have entered into executive severance agreements with each of Messrs. Pensky, Krakower and Hennemuth that provide for certain payments to Mr. Bergesthese NEOs upon termination of his employment under certain circumstances. In particular:
if we terminate Mr. Bergesthe executive for any reason other than for disability or cause, or if Mr. Bergesthe executive terminates his employment for good reason, then Mr. Bergesthe executive will receive
a lump sum payment equal to two times the sum of his then current base salary and his average MICP award over the prior three years
participation for two yearsone year after termination in all medical, dental, life insurance and other welfare and perquisite plans and programs in which Mr. Bergesthe executive was participating on the date of termination
in addition, the executive may receive an MICP award prorated for the portion of the year he was employed, if such award is payable under the terms of the MICP
in the event that we terminate Mr. Bergesthe executive for any reason other than for disability or cause, or if Mr. Bergesthe executive terminates his employment for good reason, in each case during a period which qualifies as a potential change in control period or within two years after a change in control, Mr. Bergesthe executive will receive the same payments and benefits as described above except that
the lump sum payment will be equal to three times the sum described above
participation in health, welfare and perquisite plans and programs will be for three years instead of two
the executive will be entitled to receive a modified gross-up payment for any excise tax incurred under Section 280G and Section 4999 of the Internal Revenue Code, but only if the total "parachute payments"“parachute payments” exceed Mr. Berges'the executive’s untaxed safe harbor amount by 10% or more. We have agreed to reimburse Mr. Bergesthe executive for the excise tax as well as any income tax and excise tax payable by Mr. Bergesthe executive as a result of any reimbursements for the excise tax.
in the event of termination due to death or disability, Mr. Bergesthe executive will receive an MICP award prorated for the portion of the year he was employed
Mr. Berges has agreed that, inIn consideration for these payments, he will not compete with us in any capacitythe executive has agreed to non-competition covenants for a period of two yearsone year following the termination of his employment. This includes, for example, any situation in which Mr. Berges is an employee of, consultant to, or owner of a business. If Mr. Berges' termination is in connection with a change in control, the period is extended to three years. However, this restriction would not apply if Mr. Berges' duties and responsibilities with a company that competes with us do not relate to the business segment of that company that competes with us. Mr. Berges also agreed to customary terms regarding our ownership of, and the protection and confidentiality of, our trade secrets, proprietary information, and processes, technologies, designs and inventions.
We have entered into executive severance agreements with each of Messrs. Stanage, Pensky, Krakower and Hennemuth that contain terms substantially similar to the severance terms described above for Mr. Berges, except that
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Retirement Agreements
As described on pages 44-48, ourOur NEOs are party to various arrangements that provide for benefits payable upon retirement. As described on pages 44-46,45-47, the SERP agreements that we entered into with Messrs. Berges, Stanage and Krakower provide for enhanced benefits upon our termination of the executive without cause, the executive'sexecutive’s termination for good reason or the executive'sexecutive’s termination without cause ofor for good reason during a potential change ofin control or within two years following a change in control. None of our other retirement programs for our NEOs provide for any form of enhanced or accelerated benefit upon resignation by the executive other than for good reason.
Equity Awards
Each of our NEOs has various NQOs, RSUs, and PSAs outstanding. Upon termination of employment of an NEO, the treatment of the equity award depends on the nature of the termination. Below is a description of what happens to the NEO'sNEO’s outstanding equity awards upon each different type of termination and upon a change in control.control, subject to the terms of the 2003 ISP or the 2013 ISP, as applicable.
NQOs
Voluntary departure or termination without cause—upon any termination other than retirement, disability, death, or cause, the NEO has 90 days to exercise the option to the extent vested; to the extent not vested, the option terminates.
Disability/Death—all options immediately vest and remain exercisable for one year.
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Termination for Cause—all options are forfeited.
Change in control—all options immediately vest, and if the NEO is terminated without cause or terminates his employment for good reason within two years after the change in control, the options, to the extent they remain outstanding following the change in control, remain exercisable for three years.
RSUs
Voluntary departure or termination with or without cause—all RSUs are forfeited.
Disability/Death—all RSUs immediately vest and convert to stock.
Retirement—all RSUs continue to vest on the schedule set forth in the RSU agreement.
Change in control—all RSUs immediately vest and convert to common stock.
PSAs
Termination for cause—the entire award is forfeited.
Termination by the company without cause, or due to disability, death, or retirement, orby the NEO for good reason—the NEO is entitled to a pro rata award based on the portion of the performance period for which he was employed, and also based on the extent to which the performance target is attained.
termination occurs within the first two years of the performance period, the award is limited to 100% of the shares available at target. If termination occurs within the third year of the performance period, the award will be prorated against the full amount of the award determined based on the actual level of attainment of the applicable performance goals. |
Retirement—the NEO is entitled to receive the full award for the performance period, in each case determined based on the actual level of attainment of the applicable performance goal.
Change in Control—the PSA is paid out at target immediately, unless an acquiring company exchanges the PSA for the right to receive a comparable publicly traded security, in which case the PSA is paid out at target at the end of the performance period.
An employee generally qualifies for retirement if, upon termination of employment for any reason other than for cause, he is age 65 or age 55 with five or more years of service with us.
Our agreements relating to NQOs, RSUs and PSAs require that the employee comply with any obligation of confidentiality to us contained in any written agreement signed by the employee, and refrain from competing with us. The non-compete provision is substantially similar to that contained in the severance arrangements of our NEOs described above. If the employee fails to comply with this requirement, then any outstanding equity grants are forfeited and the employee shall deliver to the company the number of option shares the employee received during the 180-day period immediately prior to the breach of the non-compete requirement, and if the employee sold any option shares during this 180-day period, then the employee shall deliver to the company the proceeds of such sales. These equity grants are also subject to the terms of the applicable plans under which they were issued including terms that cover other possible grounds for forfeiture or recoupment of payments and gains.
Change in Control; Good Reason; Cause
A "Change“Change in Control"Control” is generally defined in our plans and agreements to mean any of the following:
the acquisition by any third partyperson of 50% or more of our common stock
the acquisition by any third partyperson of 40% or more of our common stock within a 12 month period
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a merger of Hexcel or a sale of all or substantially all the assets of Hexcel, except if (i) more than 50% the stockholders of Hexcel prior to the transaction own the company resulting from the transaction in substantially the same proportion as they owned Hexcel prior to the transaction and (ii) the directors of Hexcel before the transaction comprise at least a majority of the directors of the company resulting from the transaction
"Good reason"However, an event that does not constitute a change in the ownership of Hexcel, a change in the effective control of Hexcel, or a change in the ownership of a substantial portion of Hexcel’s assets, each as defined Section 409A of the Code, will not constitute a “Change in Control”.
“Good reason” is generally defined in our plans and agreements to mean:
A material diminution in the executive'sexecutive’s position, duties, responsibilities or authority
A material reduction in the executive'sexecutive’s base salary
Failure by us to continue any compensation plan in which the executive participates which is material to the executive'sexecutive’s total compensation, unless replaced with a plan of substantially equivalent value
Failure by us to continue to provide the executive with the benefits enjoyed by the executive under our pension, savings, life insurance, medical, health, accident, and disability plans in which the executive was participating, except for across-the-board changes similarly affecting all executives, or failure by us to continue to provide the executive with at least twenty paid vacation days per year (or more if the executive is entitled to more under our vacation policy)
Failure to provide facilities or services which are reasonably necessary for the executive'sexecutive’s position
Failure of any successor to Hexcel to assume our obligations under the relevant plan or agreement hereunder or failure by us to remain liable to the executive after such assumption
In the case of the severance or SERP agreements, any termination by us of the executive'sexecutive’s employment which is not effected pursuant to a notice that complies with the relevant agreement
The relocation of the executive'sexecutive’s principal place of employment to a location more than fifty (50) miles from the executive'sexecutive’s place of employment as at the date of the relevant agreement
Failure to pay the executive any portion of compensation within seven (7) days of the date such compensation is due
"Cause"“Cause” is generally defined in our plans and agreements applicable to NEOs to mean (1) the willful and continued failure by the NEO to substantially perform his duties after we have notified the executive in writing with specificity of the nonperformance or (ii) the willful engagement by the NEO in misconduct that materially harms us. Before we can terminate an NEO for cause, our board must give the NEO notice describing the reasons we intend to terminate the NEO for cause and must pass a resolution approved by at least two-thirds of the board determining that the NEO is guilty of the improper conduct, and must provide the NEO with the opportunity to be heard before the board with counsel present.
Benefits Payable upon Termination of Employment on December 30, 201131, 2014
As described above, the following agreements and arrangements with our NEOs provide for severance or enhanced benefits upon termination of employment or a change in control:
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Other than the benefits described on page 34,pages 35-36 and these benefits and enhancements,49-53, there are no agreements, arrangements or plans that entitle executive officers to severance, perquisites, or other enhanced benefits upon termination of their employment that are not available to salaried employees generally.
The table below describes the potential benefits and enhancements under the company'scompany’s compensation and benefit plans and arrangements to which the NEOs would be entitled upon termination of employment or a change in control on December 30, 2011.31, 2014. However, the following items are excluded from the table:
The amounts reflected as the present value of the accumulated benefit in the middle column of the "Pension Benefits" table“Pension Benefits Table” on page 47,48, all of which are vested
The balances under the NDCP listed in the "Nonqualified“Nonqualified Deferred Compensation"Compensation” table on page 48, all of which are vested
Benefits provided on a non-discriminatory basis to salaried employees generally upon termination of employment, such as accrued salary, vacation pay and distributions under an employee'semployee’s 401(k) plan
None of the payments or benefits reflected in the chart below would be payable solely in the event of a change ofin control without a subsequent termination, except for payment to Mr. Pensky or Mr. Hennemuth of his EDCA benefit and vesting and conversion of the equity awards for all NEOs (and the related values) reflected below.
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Benefits Payable Upon Termination of Employment on December 30, 2011
31, 2014
| | | Cash Severance/ Payment at Death ($)(1) | Incremental Benefit under SERP or EDCA ($)(2) | Benefits Continuation ($)(3) | Accelerated Vesting of Equity Awards (value based on 12/31/2011 share price) ($)(4) | Excise Tax Gross-Up ($)(5) | Payment under MICP ($)(6) | Total Termination Benefits ($) | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
David E. Berges | ||||||||||||||||||||||||
• | Voluntary retirement | — | — | — | — | — | — | — | ||||||||||||||||
• | Involuntary or good reason termination | 5,179,123 | 861,815 | 7,205 | — | — | — | 6,048,143 | ||||||||||||||||
• | Involuntary or good reason termination after change in control | 7,768,684 | 2,226,392 | 10,808 | 308,603 | — | — | 10,314,487 | ||||||||||||||||
• | Death | 1,500,000 | — | — | — | — | — | 1,500,000 | ||||||||||||||||
• | Disability | — | 1,930,613 | — | — | — | — | 1,930,613 | ||||||||||||||||
Nick L. Stanage | ||||||||||||||||||||||||
• | Voluntary retirement | — | — | — | — | — | — | — | ||||||||||||||||
• | Involuntary or good reason termination | 1,089,498 | 1,634,886 | 11,726 | 725,110 | — | — | 3,461,220 | ||||||||||||||||
• | Involuntary or good reason termination after change in control | 3,268,495 | 1,712,567 | 35,177 | 2,956,892 | 2,790,872 | — | 10,688,013 | ||||||||||||||||
• | Death | 1,500,000 | — | — | 2,958,559 | — | — | 4,458,559 | ||||||||||||||||
• | Disability | — | 2,712,253 | — | 2,958,559 | — | — | 5,670,812 | ||||||||||||||||
Wayne C. Pensky | ||||||||||||||||||||||||
• | Voluntary retirement | — | — | — | — | — | — | — | ||||||||||||||||
• | Involuntary termination | 826,523 | — | 9,226 | — | — | — | 835,749 | ||||||||||||||||
• | Involuntary or good reason termination after change in control | 2,479,569 | — | 27,678 | 113,027 | — | — | 2,620,274 | ||||||||||||||||
• | Death | 1,653,046 | — | — | — | — | — | 1,653,046 | ||||||||||||||||
• | Disability | — | — | — | — | — | — | — | ||||||||||||||||
Ira J. Krakower | ||||||||||||||||||||||||
• | Voluntary retirement | — | — | — | — | — | — | — | ||||||||||||||||
• | Involuntary or good reason termination | 762,947 | 209,290 | 3,994 | — | — | — | 976,231 | ||||||||||||||||
• | Involuntary or good reason termination after change in control | 2,288,842 | 628,038 | 11,982 | 65,230 | — | — | 2,994,092 | ||||||||||||||||
• | Death | 1,525,895 | — | — | — | — | — | 1,525,895 | ||||||||||||||||
• | Disability | — | — | — | — | — | — | — | ||||||||||||||||
Robert G. Hennemuth | ||||||||||||||||||||||||
• | Voluntary retirement | — | — | — | — | — | — | — | ||||||||||||||||
• | Involuntary or good reason termination | 657,701 | — | 11,751 | — | — | — | 669,452 | ||||||||||||||||
• | Involuntary or good reason termination after change in control | 1,973,102 | — | 35,253 | — | 693,446 | — | 2,682,920 | ||||||||||||||||
• | Death | 1,315,401 | — | — | — | — | — | 1,315,401 | ||||||||||||||||
• | Disability | — | — | — | — | — | — | — | ||||||||||||||||
| Cash Severance/ Payment at Death ($)(1) | Incremental Benefit under SERP or EDCA ($)(2) | Benefits Continuation ($)(3) | Accelerated Vesting of Equity Awards (value based on 12/31/2014 share price) ($)(4) | Excise Tax Gross-Up ($)(5) | Payment under MICP ($)(6) | Total Termination Benefits ($) | ||||||||||||||||||||||
Nick L. Stanage | ||||||||||||||||||||||||||||
• Voluntary retirement | — | — | — | — | — | — | — | |||||||||||||||||||||
• Involuntary or good reason termination | 2,396,819 | 2,874,897 | 20,716 | — | — | — | 5,292,432 | |||||||||||||||||||||
• Involuntary or good reason termination after change in control | 3,994,698 | 3,275,246 | 34,527 | — | — | — | 7,304,471 | |||||||||||||||||||||
• Death | 1,500,000 | — | — | — | — | — | 1,500,000 | |||||||||||||||||||||
• Disability | — | 4,039,315 | — | — | — | — | 4,039,315 | |||||||||||||||||||||
Wayne C. Pensky | ||||||||||||||||||||||||||||
• Voluntary retirement | — | — | — | — | — | — | — | |||||||||||||||||||||
• Involuntary termination | 878,528 | — | 9,773 | — | — | — | 888,301 | |||||||||||||||||||||
• Involuntary or good reason termination after change in control | 2,635,584 | — | 29,318 | — | — | — | 2,664,902 | |||||||||||||||||||||
• Death | 1,757,056 | — | — | — | — | — | 1,757,056 | |||||||||||||||||||||
• Disability | — | — | — | — | — | — | — | |||||||||||||||||||||
Ira J. Krakower | ||||||||||||||||||||||||||||
• Voluntary retirement | — | — | — | — | — | — | — | |||||||||||||||||||||
• Involuntary or good reason termination | 740,867 | 177,989 | 4,234 | — | — | — | 923,090 | |||||||||||||||||||||
• Involuntary or good reason termination after change in control | 2,222,600 | 534,242 | 12,703 | — | — | — | 2,769,545 | |||||||||||||||||||||
• Death | 1,481,733 | — | — | — | — | — | 1,481,733 | |||||||||||||||||||||
• Disability | — | — | — | — | — | — | — | |||||||||||||||||||||
Robert G. Hennemuth | ||||||||||||||||||||||||||||
• Voluntary retirement | — | — | — | — | — | — | — | |||||||||||||||||||||
• Involuntary or good reason termination | 642,650 | — | 13,811 | — | — | — | 656,461 | |||||||||||||||||||||
• Involuntary or good reason termination after change in control | 1,927,950 | — | 41,433 | — | — | — | 1,969,383 | |||||||||||||||||||||
• Death | 1,285,300 | — | — | — | — | — | 1,285,300 | |||||||||||||||||||||
• Disability | — | — | — | — | — | — | — | |||||||||||||||||||||
| (1) | Involuntary or good reason termination, with or without a change in control. For all NEOs, represents the lump sum cash payment that would have been paid to the executive under the Executive Severance Policy, in the case of Mr. Stanage, or an executive severance agreement, in the case of each other NEO. |
Death. Represents the death benefit we agreed to provide to the executive.
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| (2) | For all NEOs, represents the difference between (a) the actual lump sum the NEO would have received upon the indicated type of termination on December 31, 2014, and (b) the lump sum the NEO would have received had he voluntarily terminated his employment on December 31, 2014. Neither Mr. Pensky nor Hennemuth would receive an enhancement to his EDCA benefits as a result of any type of termination of employment or a change in control. |
| (3) | Represents the value of welfare/medical benefits for (a) one and a half years (in the case of Mr. Stanage) or one year (in the case of Messrs. Pensky, Krakower and Hennemuth), upon involuntary or good reason termination without a change in control, and (b) two and half years (in the case of Mr. Stanage) or three years (in the case of Messrs. Pensky, Krakower and Hennemuth), in the event of involuntary or good reason termination following a change in control. |
| (4) | Reflects the value of equity awards that were unvested on December 31, 2014, and that would have vested as a result of the indicated type of termination of employment of the NEO. The value of an equity award is not included in this chart for any NEO because each could have retired on December 31, 2014 and either received the equity award immediately or on the schedule set forth in the applicable equity award agreement after retirement. |
| (5) | Our severance arrangements with our NEOs other than Mr. Stanage provide for a modified gross-up for excise taxes incurred on “excess parachute payments” under Sections 280G and 4999 of the Code. The amounts in the table are based on a statutory 39.6% federal income tax rate (adjusted for state taxes allowed as itemized deductions), a 2.35% Medicare tax rate and a 6.7% Connecticut state tax rate. |
| (6) | Under the MICP, if an executive leaves voluntarily prior to the end of the year, it is within our discretion whether to provide an award to the executive for such year. If an MICP participant is involuntarily terminated, he receives an award pro-rated based on the portion of the year the participant was employed. |
We are seeking a stockholder vote with respect to compensation awarded to our named executive officers for The You may vote for or against the following resolution, or you may abstain. Abstentions will have the same effect as a vote against the resolution. Broker non-votes will be disregarded and will have no effect on the outcome of the vote. This vote is advisory and non-binding. However, the compensation committee will review the voting results and take them into consideration as one factor when making future decisions regarding executive compensation, in conjunction with other factors such as feedback from stockholder outreach programs. RESOLVED, that the stockholders approve the compensation of the THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RESOLUTION APPROVING THE (3)Represents the value of welfare/medical benefits for (a) two years (in the case of Mr. Berges) or one year (in the case of Messrs. Stanage, Pensky, Krakower and Hennemuth), upon involuntary or good reason termination without a change in control, and (b) three years in the event of involuntary or good reason termination following a change in control.(4)Reflects the value of equity awards that were unvested on December 30, 2011, and that would have vested as a result of the indicated type of termination of employment of the NEO. RSUs are valued at $24.21 per RSU, the closing price of Hexcel common stock on December 30, 2011. Unvested NQOs are valued at the difference between $24.21 and the exercise price of the option; no value is attributed to NQOs if the exercise price is greater than $24.21. Vested NQOs are not reflected in the table regardless of the exercise price. PSAs are valued at $24.21 as well. For PSAs, reflects the value of the additional shares, if any, the NEO would have received as a result of the specified type of termination on December 31, 2011 as compared to a voluntary departure on the part of the NEO on such date. For all PSAs, in the event of a termination in connection with a change of control, it is assumed the acquiring company does not exchange the PSAs for the right to receive a comparable publicly traded security, and therefore assumes payout at target.The value of an equity award is not included in this chart if the NEO could have retired on December 30, 2011 and either received the equity award immediately or on the schedule set forth in the applicable equity award agreement after retirement. Messrs. Berges, Pensky and Krakower qualified for retirement under the terms of their NQO, RSU and PSA agreements, and therefore (i) no value is reflected for their NQOs and RSUs, and (ii) for their PSAs, no value is reflected in any termination scenario except for a change in control, in which case the value represents the additional shares, if any, the executive would have received upon termination in connection with a change in control on December 30, 2011 (based on a payout at target) and the value of the shares the NEO would have received if he retired on December 30, 2011 (which would have resulted in a pro-rata payout based on the portion of the performance period the executive was employed, and the extent to which the company achieved the applicable performance measure).(5)Our severance arrangements with the NEOs provide for a modified gross-up for excise taxes incurred on "excess parachute payments" under section 280G of the Internal Revenue Code. The amounts in the table are based on a 280G excise tax rate of 20%, a statutory 35% federal income tax rate (adjusted for state taxes allowed as itemized deductions), a 1.45% Medicare tax rate and a 6.7% Connecticut state tax rate. With respect to Mr. Stanage, the modified gross-up applies only with respect to a change in control that occurs on or before November 9, 2014.(6)Under the MICP, if an executive leaves voluntarily prior to the end of the year, it is within our discretion whether to provide an award to the executive for such year. If an MICP participant is involuntarily terminated, he receives an award pro-rated based on the portion of the year the participant was employed.
PROPOSAL 2—APPROVAL OF THE COMPANY'S 2011COMPANY’S 2014 EXECUTIVE COMPENSATION20112014 as required pursuant to Section 14A of the Exchange Act.company'scompany’s executive compensation program and compensation paid to the named executive officers are described on pages 19 to 5521-38 of this proxy statement. The compensation committee oversees the program and compensation awarded, adopting changes to the program and awarding compensation as appropriate to reflect the company'scompany’s circumstances and to promote the main objectives of the program: to provide competitive overall pay relative to peers, taking into account company performance, to effectively tie pay to performance, and to align the named executive officers'officers’ interest with the interest of stockholders. We currently hold our advisory stockholder vote with respect to named executive officer compensation every year. The next advisory stockholder vote on named executive officer compensation will be held at our 2016 annual meeting of stockholders.company'scompany’s named executive officers, as disclosed under Securities and Exchange Commission rules, including the compensation discussion and analysis, the compensation tables and related material included in this proxy statement.COMPANY'S 2011COMPANY’S 2014 EXECUTIVE COMPENSATION
EQUITY COMPENSATION PLAN INFORMATION
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The following information is provided as of December 31, 2014:
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights(1) | Weighted-average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column(a))(1) | |||||||||
| (a) | (b) | (c) | ||||||||||
Equity compensation plans approved by security holders | 4,222,623(2) | $ | 19.12(3) | 3,446,500(4) | ||||||||
Equity compensation plans not approved by security holders | 0 | N/A | 0 | |||||||||
|
|
|
|
|
| |||||||
Total | 4,222,623 | $ | 19.12(3) | 3,446,500(4) | ||||||||
|
|
|
|
|
| |||||||
| (1) | All numbers in these columns refer to shares of Hexcel common stock. |
| (2) | Includes 2,831,912 shares issuable upon the exercise of NQOs, 511,786 shares issuable upon the vesting and conversion of RSUs, and 878,925 shares issuable with respect to outstanding PSAs. With respect to PSAs for the 2012-2014 performance period, reflects 227,324 shares to be issued, based on the level of attainment of ROIC (the applicable performance measure) during the 2012-2014 period. With respect to the 2013-2015 and 2014-2016 periods, assumes that we will attain the maximum level of ROIC under the PSAs for each performance period, which would result in the PSAs converting into the maximum number of RSUs in early 2016 and 2017, respectively. |
| (3) | Excludes the RSUs and PSAs referred to in note 2 above because they have no exercise price. |
| (4) | Includes (i) 3,372,396 shares of common stock available for future issuance under the 2013 ISP, which shares of common stock could be issued in connection with awards other than outstanding options, warrants or rights, (ii) 74,104 shares of common stock subject to options as of December 31, 2014 under, and purchased in January 2015 pursuant to, the terms of the Hexcel Corporation 2009 Employee Stock Purchase Plan or that could after December 31, 2014 become subject to options under, and therefore be purchased under, the terms of the Hexcel Corporation 2009 Employee Stock Purchase Plan. |
The audit committee is responsible for assisting the board'sboard’s oversight of the integrity of our financial statements, our exposure to financial risk and mitigation of those risks, our compliance with legal and regulatory requirements, our independent registered public accounting firm'sfirm’s qualifications, independence and performance, and our internal audit function. We also appoint our independent registered public accounting firm, and submit our selection to our stockholders for ratification. We operate under a written charter adopted and approved by the Board of Directors, which is available at our website, www.hexcel.com.www.hexcel.com
Management is responsible for the financial reporting process, including the system of internal controls, and for the preparation of consolidated financial statements in accordance with generally accepted accounting principles in the United States. Our independent registered public accounting firm is responsible for auditingperforming an integrated audit of the Company’s financial statements and expressing an opinion as to their conformityinternal control over financial reporting in accordance with generally accepted accounting principles in the United States.auditing standards of the Public Company Accounting Oversight Board (“PCAOB”). Our responsibility is to monitor and review these processes.
We held eight meetings in 2011,2014, held numerous discussions with management and met in executive session, without management, with PricewaterhouseCoopers LLP, our independent registered public accounting firm. We also met in executive session, without management present, with our internal auditors. We have reviewed and discussed the consolidated financial statements with management and the independent registered public accounting firm. We discussed with the independent registered public accounting firm matters required to be discussed by PCAOB standards, as amended (AICPA,Professional Standards, Vol 1. AU Section 380) as adopted by the Public Company Accounting Oversight Board in Rule 3200T.
Our independent registered public accounting firm also provided the written disclosures required by PCAOB Rule No. 3526,Communications with Audit Committees Concerning Independence, and we discussed with the independent registered public accounting firm their independence.
Based on our review and the discussions referred to above, we recommended that the board include our audited consolidated financial statements in the Annual Report on Form 10-K for the year ended December 31, 20112014 filed with the SEC. We have also selected PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2012,2015, and we are asking our stockholders to ratify our selection.
Jeffrey C. Campbell, Chair
Lynn BrubakerW. Kim Foster
Cynthia M. Egnotovich (elected January 1, 2015)
David C. Hill
The Members of the Audit Committee
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PROPOSAL 3—RATIFICATION OF SELECTION OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
We are asking stockholders to ratify the audit committee'scommittee’s appointment of PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2012. In the event the appointment of PricewaterhouseCoopers LLP is not ratified, the audit committee will consider the appointment of another independent registered public accounting firm.2014. Stockholder ratification of the appointment of PricewaterhouseCoopers LLP is not required under our Restated Certificate of Incorporation or Amended and Restated Bylaws, but is being submitted as a matter of good corporate practice. The audit committee is not bound by the outcome of this vote, but, if the appointment of PricewaterhouseCoopers LLP is not ratified by stockholders, the audit committee will reconsider the appointment.
PricewaterhouseCoopers LLP has audited our financial statements annually since 1997. A representative of PricewaterhouseCoopers LLP is expected to be present at the Annual Meeting. The representative will have an opportunity to make a statement if he desires to do so and will be available to answer appropriate questions from stockholders.
Audit Fees
The aggregate fees billed by PricewaterhouseCoopers LLP for 20112014 for professional services rendered for the audit of our annual financial statements and review of the financial statements included in our Forms 10-Q and services provided in connection with foreign statutory and regulatory filings and engagements were approximately $1,736,000.$2,387,000. With respect to 2010,2013, the aggregate amount of such fees was approximately $1,803,000.$2,046,000.
Audit-Related Fees
ThereFees of $27,500 and $27,600 were approximately $18,500 in fees billed by PricewaterhouseCoopers LLP in 20112014 and 2013, respectively, for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and which are not included in the amount for 2011 under "Audit Fees"“Audit Fees” above. TheseThe fees related primarily to a transfer pricing review. With respect to 2010, the amount of such fees was approximately $37,000, related primarily to the aforementioned transfer pricing reviewaccounting services in 2014 and the filing of a prospectus with respect to common stock to be issued under our employee stock purchase plan.2013.
Tax Fees
The aggregate fees billed by PricewaterhouseCoopers LLP in 20112014 and 20102013 for professional services rendered for tax compliance, tax advice and tax planning were approximately $305,400$1,461,700 and $490,000,$901,000, respectively. For both 2011 and 2010, theseThese fees related primarily to researchtax planning services and developmentdocumentation of various tax credit documentation and European tax compliance.credits.
All Other Fees
There was an additional $2,600 billed by PricewaterhouseCoopers LLP in 20112014 and 2013 for a one-year license to use their proprietary online accounting research tool. In 2010, $5,200 was billed for the accounting research tool license and statutory accounting training for our associates in Spain.
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Audit Committee Pre-Approval Policies and Procedures
Our audit committee'scommittee’s policy is to pre-approve all audit and permissible non-audit services provided by our independent registered public accounting firm on an annual basis. These services may include audit services, audit-relatedaudit- related services, tax services and other services. The independent registered public accounting firm and management are required to periodically report to the audit committee regarding the amount of audit and non-audit service fees incurred to date.
Rule 2-01(c)(7)(i) under SEC Regulation S-X provides that a company'scompany’s independent registered public accounting firm can provide certain non-audit services without the prior approval of the audit committee if certain conditions are met, including that the services are incurred in accordance with policies and procedures detailed as to the particular service adopted by the company and are brought promptly to the attention of the audit committee.
The ratification of the appointment of PricewaterhouseCoopers LLP requires the affirmative vote of a majority of the shares present in person or by proxy and entitled to vote on the matter at the Annual Meeting once a quorum is present. Abstentions will be counted and will have the same effect as a vote against the proposal. The audit committee is directly responsible for appointing the Company'sCompany’s independent registered public accounting firm, regardless of the outcome of this vote. The audit committee is not bound by the outcome of this vote but, if the appointment of PricewaterhouseCoopers LLP is not ratified by stockholders, the audit committee will reconsider the appointment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP
CERTAIN RELATIONSHIPS AND RELATED PERSON TRANSACTIONS
Review and Approval of Related Person Transactions
We have adopted a written policy that requires the review and pre-approval of all potential transactions valued at greater than $10,000 in which we and any of our directors, executive officers, stockholders owning greater than 5% of any class of our securities or any of their immediate family members participates or otherwise has an interest. The audit committee is responsible for evaluating and authorizing any transaction with a value greater than $120,000, although any member of the audit committee who is a related person with respect to a transaction under review may not participate in the deliberations or vote respecting approval or ratification of the transaction in question. The Chief Financial Officer is responsible for evaluating and authorizing any transaction with a value between $10,000 and $120,000, unless the Chief Financial Officer is a related person with respect to the transaction under review, in which case the General Counsel shall be responsible for such evaluation and possible authorization.
The factors to be considered in determining whether or not to authorize a transaction brought to the attention of the audit committee or the Chief Financial Officer under this policy include the following:
the terms of the transaction, and whether the terms are no less favorable to us than would be obtained in the transaction were entered into with a party other than a related person
the benefits to us
the availability of other sources for the product or service that is the subject of the transaction
the timing of the transaction
58
any other factors deemed relevant
The company had no related person transactions during 2011,since the beginning of 2014, and is not currently aware of any proposed related person transactions.
In September 2014, the board approved a change to the company’s bylaws to include a forum selection clause, and publicly filed such changes with the SEC. The forum selection clause provides generally that the Delaware Court of Chancery is the exclusive forum for (i) derivative actions brought on behalf of the company; (ii) actions asserting a breach of fiduciary duty by a director, officer or other employee; (iii) actions governed by the internal affairs doctrine and (iv) certain other actions arising under Delaware Corporation law or the company’s certificate of incorporation or bylaws. The board adopted this clause because it believes it to be in the best interests of the company and our stockholders. The clause is intended to benefit the company and stockholders in significant part by directing litigation to a single Delaware court, which will apply its own state law with a well-established body of precedent, thereby reducing the risk and expense of concurrent, multi-jurisdictional litigation, saving company resources (money and management attention) and leading to a single, more predictable outcome in litigation involving corporate governance and internal affairs. The clause does not preclude any type of litigation against the company, its officers or directors; it simply channels certain litigation to a single experienced court to enable a more efficient and effective resolution of disputes tied to Delaware. The amended bylaws also make clear that the board may, under certain circumstances, waive the forum selection clause if it determines that it is in the best interest of stockholders.
Our charter requires us generally to indemnify our directors and executive officers to the fullest extent permitted by Delaware law. Additionally, as permitted by Delaware law, we have entered into indemnification agreements with each of our directors and elected officers. Under the indemnification agreement, we have agreed to hold harmless and indemnify each indemnitee, generally to the fullest extent permitted by Delaware law, against expenses, liabilities and loss incurred in connection with threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative to which the indemnitee is made a part by reason of the fact that the indemnitee is or was a director or officer of the company or any other entity at our request; provided, however, that the indemnitee acted in good faith and in manner reasonably believed to be in the best interest of our company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than ten percent of a registered class of our equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of Hexcel common stock. Executive officers, directors, and greater than ten percent stockholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. To our knowledge, based solely on a review of the copies of such reports furnished to us and representations that no other reports were required, for the year ended December 31, 2011,2014, all Section 16(a) filing requirements applicable to our executive officers, directors and greater than ten percent stockholders were complied with, except (i) a Form 4 filed by Mr. Nick L. Stanage on February 3, 2011 should have been filed on or prior to February 2, 2011; (ii) a Form 4 filed by Mr. Robert G. Hennemuth on February 18, 2011 erroneously omitted the withholding of 4,785 shares of common stock as payment of tax withholding required upon exercise of NQOs (this was corrected by an amended Form 4 filed on February 23, 2011); (iii) a Form 4 filed by Mr. David E. Berges on March 10, 2011 incorrectly reported that 6,817 shares of common stock were exchanged with the company with respect to payment of required tax withholding, while such shares were actually withheld as payment of such tax withholding (this was corrected by an amended Form 4 filed on March 17, 2011); and (iv) a Form 4 filed by Mr. Wayne C. Pensky on July 20, 2011 incorrectly overstated by 992 the number of shares of common stock beneficially owned by Mr. Pensky as such shares had previously been held in a joint account with Mr. Pensky's son, but were no longer in a joint account and Mr. Pensky had no beneficial ownership interest in such shares (this was corrected by an amended Form 4 filed on January 24, 2012).with.
As of the date of this proxy statement, the board does not know of any other matters to be presented for action by the stockholders at the Annual Meeting. However, if any other matters not known are properly brought before the Annual Meeting, proxies will be voted at the discretion of the proxy holders and in accordance with their judgment on such matters.
Stockholder proposals intended for inclusion in our proxy materials for the 2013 Annual Meeting2016 annual meeting of Stockholdersstockholders pursuant to Rule 14a-8 under the Exchange Act must be submitted in writing not later than November 16, 201220, 2015 to the Corporate Secretary at Hexcel Corporation, Two Stamford Plaza, 281 Tresser Boulevard, Stamford, CT 06901-3238.
Our Bylaws require that proposals of stockholders that are made outside of Rule 14a-8 under the Exchange Act and nominations for the election of directors at the 2013 Annual Meeting2016 annual meeting of Stockholdersstockholders be submitted, in accordance with the requirements of our Bylaws, not later than January 3, 20138, 2016 in order to be considered timely. Stockholders are also advised to review our Bylaws, which contain additional requirements about advance notice of stockholder proposals and director nominations. We may exclude untimely proposals from our 20132016 proxy statement. Management proxies will have discretionary authority to vote on the subject matter of the excluded proposal if otherwise properly brought before the annual meeting.
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IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE
STOCKHOLDER MEETING TO BE HELD ON MAY 3, 2012
7, 2015
The proxy statement, annual report to security holders and related materials are available athttp://phx.corporate-ir.net/phoenix.zhtml?c=75598&p=proxy.
Our Annual Report to Stockholders containing audited consolidated financial statements for the year ended December 31, 2011,2014, is being mailed herewith to all stockholders of record. Additional copies are available without charge on request. Requests should be addressed to the Corporate Secretary, Hexcel Corporation, Two Stamford Plaza, 281 Tresser Boulevard, Stamford Connecticut, 06901-3238.
Stamford, Connecticut
March 16, 201219, 2015
60
¢
HEXCEL CORPORATION
Two Stamford Plaza
281 Tresser Boulevard
Stamford, Connecticut 06901
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
To be held on May 7, 2015
This Proxy is Solicited by the Board of Directors of Hexcel Corporation
The undersigned stockholder of Hexcel Corporation ( Hexcel ) hereby appoints Nick L. Stanage, Wayne C. Pensky and Ira J. Krakower and each of them, the lawful attorneys and proxies of the undersigned, each with powers of substitution, to vote all shares of Common Stock of Hexcel held of record by the undersigned on March 12, 2015 at the Annual Meeting of Stockholders (the Annual Meeting ) to be held at the Community Room, Two Stamford Plaza, 281 Tresser Boulevard, Stamford, Connecticut, on May 7, 2015 at 10:30 a.m., local time, and at any and all adjournments or postponements thereof, with all the powers the undersigned would possess if personally present, upon all matters set forth in the Notice of Annual Meeting of Stockholders and Proxy Statement dated March 19, 2015, receipt of which is hereby acknowledged.
(Continued and to be signed on the reverse side)
| ¢ 1.1 | 14475 ¢ |
ANNUAL MEETING OF STOCKHOLDERS OF
HEXCEL CORPORATION
May 7, 2015
GO GREEN
| e-Consent makes it easy to go paperless. With e-Consent, you can quickly access your proxy material, statements and other eligible documents online, while reducing costs, clutter and paper waste. Enroll today via www.amstock.com to enjoy online access. | ||||||
NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL:
The Notice of Meeting, proxy statement and proxy card
are available at http://phx.corporate-ir.net/phoenix.zhtml?c=75598&p=proxy
Please sign, date and mail
your proxy card in the
envelope provided as soon
as possible.
Please detach along perforated line and mail in the envelope provided.
| ¢ | 00033333333333330000 0 | 050715 |
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x | ||
This proxy, when properly executed, will be voted in the manner directed herein. If no such direction is given, this proxy will be voted in accordance with the Board of Directors’ recommendations, and in the discretion of the proxy holder on any other matter that may properly come before the meeting. |
| 1. | Election of directors (check one box only): | FOR | AGAINST | ABSTAIN | ||||||||||
Nick L. Stanage | ¨ | ¨ | ¨ | |||||||||||||
Joel S. Beckman | ¨ | ¨ | ¨ | |||||||||||||
Lynn Brubaker | ¨ | ¨ | ¨ | |||||||||||||
Jeffrey C. Campbell | ¨ | ¨ | ¨ | |||||||||||||
Cynthia M. Egnotovich | ¨ | ¨ | ¨ | |||||||||||||
W. Kim Foster | ¨ | ¨ | ¨ | |||||||||||||
Thomas A. Gendron | ¨ | ¨ | ¨ | |||||||||||||
Jeffrey A. Graves | ¨ | ¨ | ¨ | |||||||||||||
Guy C. Hachey | ¨ | ¨ | ¨ | |||||||||||||
David C. Hill | ¨ | ¨ | ¨ | |||||||||||||
David L. Pugh | ¨ | ¨ | ¨ | |||||||||||||
2. | Advisory vote to approve 2014 executive compensation | ¨ | ¨ | ¨ | ||||||||||||
3. | Ratification of PricewaterhouseCoopers LLP as Independent Registered Public Accounting Firm | ¨ | ¨ | ¨ | ||||||||||||
4. | To transact such other business as may properly come before the Annual Meeting | |||||||||||||||
| To change the address on your account, please check the box at | ¨ | |||||||||||||||
| Signature of Stockholder | Date: | Signature of Stockholder | Date: | |||||||||||||||||
| ¢ | Note: | Please sign exactly as your name or names appear on this Proxy. When shares are held jointly, each holder should sign. When signing as executor, administrator, attorney, trustee or guardian, please give full title as such. If the signer is a corporation, please sign full corporate name by duly authorized officer, giving full title as such. If signer is a partnership, please sign in partnership name by authorized person. | ¢ |
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